tag:blogger.com,1999:blog-37649120397419740372015-08-01T03:28:19.577-04:00Expect[ed] LossPF2http://www.blogger.com/profile/13893025381406343985noreply@blogger.comBlogger191125tag:blogger.com,1999:blog-3764912039741974037.post-64555265621378470602015-07-22T08:24:00.000-04:002015-07-22T11:24:40.529-04:00Should Puerto Rico Bondholders Get a Taxpayer Bailout?<div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">Critics of extending Chapter 9 to Puerto Rico argue that the policy would allow the Commonwealth to wiggle out of its commitments. If Puerto Rico’s cities and public corporations can file bankruptcy petitions, they will be handed an option to avoid making debt service payments on time and in full.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">Public sector entities don’t need municipal bankruptcy laws to default: thousands defaulted before Chapter 9 was first added to the bankruptcy code in 1934.&nbsp; More recently, Harrisburg defaulted on multiple obligations despite the fact that Pennsylvania does not permit Chapter 9.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">That said, opposition to Puerto Rico municipal bankruptcy is rooted in an important moral sense: when we make commitments, we should keep them. Performing on a bond indenture is just another form of keeping one’s word. If this moral underpinning of our debt markets were to seriously erode, borrowers would face much higher interest rates or even complete lack of access to funds.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">But is this consideration an absolute or should it be balanced against other concerns? In the case of Puerto Rico, many public sector entities are no longer able to meet the expectations of all their stakeholders: which include public employees, service recipients and taxpayers in addition to bondholders. <o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">Because bondholders have a written agreement that clearly outlines their claims, they warrant special consideration. That said, we need to recognize that bond commitments are often fulfilled by taking money from taxpayers - who may not have approved of the bonds in the first place. <o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">In recent decades, conservatives have been very critical of taxation in all its forms. This stance is partially inspired by the libertarian view that “taxation is theft”. If we take this idea to its logical extreme, we conclude that the government has no right to service bonds with tax money – implying that <a href="http://fff.org/explore-freedom/article/repudiate-the-national-debt/" target="_blank">all general obligation debt should be repudiated</a>.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">Since most of us have exposure, directly or indirectly, to tax supported debt, such a widespread repudiation would wreck considerable havoc. But, while we may shy away from the logical extreme, the taxpayer perspective deserves consideration. The bondholder’s right to repayment must be balanced against the taxpayer’s right to keep at least some of her income and wealth.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">This moral balance can shift when the creditor is wealthy and at least some of the taxpayers aren’t. This is what united left and right in criticizing the 2008 bailout of AIG. It is important to remember that the largest beneficiaries of the AIG bailout were its creditors, many of whom were wealthy financial industry players like Goldman Sachs. The bailout of AIG thus constituted a wealth transfer from middle income taxpayers to the financial elite.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">That could happen once again in the case of Puerto Rico. Much of the Commonwealth’s debt has been <a href="http://hedgeclippers.org/hedgepapers-no-17-hedge-fund-billionaires-in-puerto-rico/" target="_blank">snappedup</a> by hedge funds at steep discounts. If the funds can compel Puerto Rico public sector entities to service their bonds on time and in full, they will make substantial profits. One out of every five dollars of this profit will go to hedge fund managers, who will be taxed at lower capital gains rates.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">For those reading this blog on the US mainland, the fact that taxpayer money might be unjustly diverted to hedge funds may not seem like a salient concern. But, it is, because a considerable share of Puerto Rico government revenue comes from taxpayers in the fifty states.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">Public sector entities in Puerto Rico receive over $7.2 billion in federal grants annually. This amount represents over 10% of the Commonwealth’s GNP and 22% of total government spending. I have uploaded a list of recipient entities and amounts for FY 2013 <a href="https://drive.google.com/file/d/0B8eqFMESA0wAaWtTSkM1eDVxV1k/view?usp=sharing" target="_blank">here</a>. <o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">Further, according to USASpending.gov, the US federal government <a href="https://www.usaspending.gov/transparency/Pages/statesummary.aspx?StateCode=PR&amp;FiscalYear=2014" target="_blank">spent</a>a total of $21.3 billion in Puerto Rico in fiscal year 2014, while the IRS reports that Commonwealth residents and corporations <a href="http://www.irs.gov/file_source/pub/irs-soi/14db05co.xls" target="_blank">contributed</a>just $3.6 billion in federal tax revenue during the same year. The difference between these two figures – net transfers from taxpayers in the fifty states - represents about a quarter of Puerto Rico’s GNP.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">Thus, Puerto Rico and its governments derive much of their revenue from US taxpayers. Although federal grants are always made for a specific purpose, government revenues and expenditures are <a href="https://books.google.com/books?id=5zFQsDAPsAEC&amp;pg=PA26&amp;lpg=PA26&amp;dq=fungible+intergovernmental&amp;source=bl&amp;ots=sWTh1GkmSV&amp;sig=FAf8pNlpWJ40XwCHFhYepsE9W-g&amp;hl=en&amp;sa=X&amp;ved=0CB8Q6AEwAGoVChMIor_ThYLtxgIVAY4NCh3lVQBI#v=onepage&amp;q=fungible%20intergovernmental&amp;f=false" target="_blank">fungible</a>. Governments receiving federal support can shift their own-source revenue away from federally subsidized priorities and towards other purposes – such as enriching hedge fund managers.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><br /><div class="MsoNormal" style="text-align: justify;"><span style="font-family: inherit;">Consequently, the debate over debt relief for Puerto Rico cannot be properly addressed by platitudes about fiscal responsibility and the need to live up to one’s commitments. By denying the Chapter 9 option to Puerto Rico municipalities and public corporations, Congressional Republicans might well be doing a disservice to the middle class taxpayers they claim to represent.</span><o:p></o:p></div>Marc Joffehttps://plus.google.com/102572265799554788902noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-47940944202079441572015-07-13T10:00:00.000-04:002015-07-13T10:51:17.958-04:00The Specious Case against Extending Chapter 9 to Puerto Rico<div style="text-align: justify;">Last week, Congressional Republicans blocked legislation that would have allowed Puerto Rico public sector entities to file municipal bankruptcy petitions. Among their arguments against extending Chapter 9 to the Commonwealth are that bond investors – who purchased Puerto Rico obligations with the knowledge that issuers could not file bankruptcy – would be unfairly punished and that the island’s government has not implemented sufficient austerity measures.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">While buyers of Puerto Rico bonds may have known that issuers did not have access to Chapter 9, they were aware that default was a distinct possibility – and that is all that really counts. We can confirm that investors knew of the existence of default risk by comparing Puerto Rico bond yields to risk free interest rates.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In November 2009, Puerto<a href="http://emma.msrb.org/EP347620-EP48036-EP670082.pdf"> issued</a> 30-year bonds at a yield of 6%. At the time, 30-year US Treasury bonds were<a href="http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&amp;year=2009" target="_blank"> yielding</a> under 4.5%. While differences in liquidity might explain some difference in yields – this effect cannot possibly account for a 150bp gap. Further, interest on Puerto Rico bonds is exempt from federal income tax whereas Treasury bond interest is not (interest on both types of bonds is exempt from state and local income taxes. This tax effect should easily overwhelm any liquidity effect.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I use a 2009 example to show that investors have been pricing Puerto Rico default risk for a long time. Those who bought Puerto Rico bonds more recently demanded and received much higher default risk premia. The Commonwealth’s 2014<a href="http://emma.msrb.org/IssueView/IssueDetails.aspx?id=EA350120" target="_blank"> issue</a> yielded 500 basis points above 30-year Treasuries and the gap has widened further in<a href="http://emma.msrb.org/IssueDetails/Trades/EA350120" target="_blank"> secondary trading</a>.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Thus anyone who purchased Puerto Rico bonds over the last several years was compensated for default risk. Indeed, depending upon the type of restructuring Puerto Rico implements, many secondary market investors could still see positive returns.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">During the Depression era, sub-sovereigns in the US, Canada and Australia (operating under similar legal systems) extended maturities and/or unilaterally reduced coupon rates. In all these cases (Arkansas, South Carolina, Alberta, Australia and New Zealand), investors eventually received their full principal. These older cases may be more relevant to Puerto Rico than the oft-cited cases of Detroit, Stockton and Greece in which investors suffered significant principal losses. Puerto Rico is more analogous to a US state than either Stockton or Detroit, and it is not a serial defaulter operating outside Anglo-Saxon law like Greece. In her recent government-commissioned<a href="http://recend.apextech.netdna-cdn.com/docs/editor/Informe%20Krueger.pdf" target="_blank"> report</a>, former IMF Managing Director Ann Krueger argues that the Commonwealth can obtain debt relief “through a voluntary exchange of old bonds for new ones with a later/lower debt service profile.”</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b>Why Chapter 9 Is Needed</b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Puerto Rico’s headline debt number - $72 billion of par representing a 104% debt/GNP ratio – includes a lot of moving parts. Some of this complexity is captured by the Commonwealth’s debt statement shown below.&nbsp;</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-rMI-MsZ-Sx8/VaMx6ghZkaI/AAAAAAAABCg/Sd6gWQEQ3Ew/s1600/PR_Debt_Statement_20150331.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="376" src="http://1.bp.blogspot.com/-rMI-MsZ-Sx8/VaMx6ghZkaI/AAAAAAAABCg/Sd6gWQEQ3Ew/s640/PR_Debt_Statement_20150331.jpg" width="640" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The statement shows numerous classes of debt – with varying coverage pledges&nbsp;–&nbsp;owed by different types of obligors. But it hides an even greater level of detail: the Commonwealth’s $4 billion in municipal debt is owed by 78 separate<a href="http://www2.pr.gov/Directorios/Pages/DirectoriodeMunicipios.aspx" target="_blank"> municipos</a> – county-like entities – on the island. The $30 billion of public corporation debt was incurred by six different entities.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">These obligors have widely varying levels of credit quality. As I<a href="http://www.bondbuyer.com/news/commentary/puerto-rico-faces-fiscal-distress-in-cities-1071461-1.html"> reported</a> in the <i>Bond Buyer</i> earlier this year, the Commonwealth’s third largest city,<a href="http://www.abrepr.org/sites/default/files/Carolina_0.JPG" target="_blank"> Carolina</a>, was running a balanced budget and reported significant reserves in its 2013 financial statement. By contrast, the small municipio of<a href="http://www.abrepr.org/sites/default/files/Maunabo.JPG" target="_blank"> Maunabo</a>, was flat broke – with a large negative general fund balance, bank overdrafts and defaulting on a US Department of Agriculture loan. The Chapter 9 process would provide an essentially bankrupt community like Maunabo with the ability to reorganize its finances in a more sustainable manner. Fiscally healthy communities like Carolina can signal their strength to investors by avoiding Chapter 9 and continuing to perform on their obligations.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b>Inconvenient Truths about the Austerity Argument</b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Almost half of Puerto Rico’s debt was issued by entities other than the Commonwealth government. The Commonwealth’s $38 billion of debt represents just under 70% of Gross National Product. If we use Puerto Rico’s less widely reported (bur more internationally comparable) Gross Domestic Product as the denominator, the ratio falls to around 37%. All this compares favorably to the US federal government’s debt-to-GDP ratio of 74%.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The accompanying chart and<a href="https://docs.google.com/spreadsheets/d/1mp9_Xii_uce6JauZdIPg657aHn7fDmRXgjjG0bud1Xc/edit?usp=sharing" target="_blank"> this Google sheet</a> show the evolution of Puerto Rico’s debt ratios over the last 40 years. The main takeaways are that the Commonwealth has had a heavy public sector debt burden for a long time, but it rose steadily 2000 to 2014.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><img height="248" 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width="640" /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Puerto Rico had a Republican Governor for a significant part of this period: Luis Fortuño. Not only was he a Republican, but he was a darling of the Party establishment: invited to address the 2012 Republican Presidential convention and receiving consideration as a Vice-Presidential nominee. During Fortuño’s last full fiscal year, 2011-2012, total governmental revenues were $15.8 billion and total expenditures were $21.0 billion. The $5.2 billion deficit was the worst in ten years. Since the Democratically-aligned Alejandro Padilla administration took control, deficits have fallen. According to the most recent Commonwealth financial<a href="http://emma.msrb.org/ER875882-ER684327-ER1086003.pdf" target="_blank"> report</a>, the general fund deficit fell from $2.4 billion in fiscal 2012 to $1.3 billion in fiscal 2013 and $0.9 billion in fiscal 2014.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">This progression toward budgetary balance and the Commonwealth’s loss of market access have produced a flattening of Puerto Rico’s debt ratios. In the nine months ended March 2015, total public sector debt actually declined slightly in nominal terms.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Puerto Rico’s fiscal policy has thus been more austere under the current left-of-center government than under the prior Republican administration. Moreover, the Puerto Rican government is accumulating debt at a slower rate than the US federal government – which is now mostly under Republican control.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Thus, Congressional Republicans seem poorly positioned to lecture Puerto Rico about fiscal responsibility. A better alternative would be to approve Chapter 9 legislation, so that Commonwealth entities can get on with the process of restructuring their diverse debt burdens.</div>Marc Joffehttps://plus.google.com/102572265799554788902noreply@blogger.com2tag:blogger.com,1999:blog-3764912039741974037.post-89500732656064853852015-07-07T12:18:00.000-04:002015-07-09T18:49:46.379-04:00Disclosure, or What You Will<div style="text-align: justify;">Seven years after the demise of Lehman Brothers, lawsuits on related financial products are heating up, with a number of RMBS and CDO cases seeing reversals of fortune.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">But first, some background.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">This may seem odd<span style="font-family: &quot;Calibri&quot;,sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: &quot;Times New Roman&quot;; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">&nbsp;–&nbsp;</span>but so far most of the arguments have had little to do with whether the defendants did anything wrong.[1] &nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Rather, the focus has been on peripheral issues, like: (1) jurisdiction; (2) whether the plaintiffs had standing to sue; (3) whether the plaintiffs sued within the permissible time frame; (4) whether the defendants were indeed obligated to fulfill any of the duties they are accused of violating; and (5) whether the investment risks were appropriately disclosed.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Recent rulings have focused on this final element, and have been rendered in a way largely favorable to the plaintiffs. This is the focal point of today’s post.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b><i><br /></i></b></div><div style="text-align: justify;"><b><i>Disclosures and Disclosures – Five Shades of Grey&nbsp;</i></b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Disclosures are subjective issues; they are forms of art. And, most importantly, they are not Boolean – they are not simply present or absent.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">There are various shades of grey. Consider for example the following possible disclosures regarding a bridge:&nbsp;</div><div style="text-align: justify;"></div><ol><li>Cross bridge at your own risk&nbsp;</li><li>We have performed one or more tests and happen to believe that this bridge is particularly risky, or more risky than other bridges&nbsp;</li><li>This bridge fails to satisfy the criteria set for bridges by the relevant architectural/building standards and safety boards&nbsp;</li><li>We built this bridge and know that it suffers from certain structural flaws&nbsp;</li><li>This may look like a bridge, but it is made of straw and has simply been dressed up to look like a bridge. Do not cross!&nbsp;</li></ol><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-_v9-iBDVYlo/VZv3HL392GI/AAAAAAAAAU8/VP2BC8Sa4G4/s1600/DISCLOSURES%2B2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="305" src="http://3.bp.blogspot.com/-_v9-iBDVYlo/VZv3HL392GI/AAAAAAAAAU8/VP2BC8Sa4G4/s640/DISCLOSURES%2B2.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">These disclosures differ greatly, and one cannot reasonably argue that all provide the same informational content.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Of course, it may be okay to sell a distressed asset or a structurally flawed house, as long as its known shortcomings are appropriately disclosed; but when a <i><u>particular</u></i> risk is known to one party (often the seller) we argue that the material information needs to be properly disclosed.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">For our purposes, it may be helpful to break disclosures down into three broad categories:&nbsp;</div><div style="text-align: justify;"></div><ol><li>Those that are general (non-specific) and describe overall risk</li><li>Those that describe particular risk(s)</li><li>Those that describe the advanced knowledge that one party to an agreement has (over the other) pertaining to particular risk(s)&nbsp;</li></ol><br /><div style="text-align: justify;"><b><i><br /></i></b></div><div style="text-align: justify;"><b><i>Reliance – A Pr</i></b><b><i>actitioner’s Perspective[2]&nbsp;</i></b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The recent rulings, which we’ll get to in a moment, give us some confidence that the legal system is supporting the essence of what investing in the US financial markets is all about.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The defenses that “it was disclosed that the investment contained risk” or that “we warned the investor to perform his own due diligence” seem to us to be off-point and insufficient.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">From a practitioner’s perspective, it should be noted that investors are just about always warned that investments contain risks. Of course they do – there’s seldom a reason to invest without the expectation of a positive return[3], and risk and return go hand in hand. And due diligence can often be impractical or prohibitively expensive, and even if it can be performed it may not uncover the true nature of hidden risks, especially if they are known only to certain insiders.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>But in this “trust -but-verify” bargain, is the “trust” element still there?&nbsp;</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Let’s suppose that due diligence could be performed. Should investors have to check everything – every piece of data represented to them to be true and accurate, every potential conflict disclosed or undisclosed, every legal opinion upon which the transaction’s solidity is based, and every accounting record? What is the purpose of a representation or warranty, if the onus remains on the person accepting the representation or warranty?&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In short, shouldn’t investors be allowed to rely on some things?&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Buying a new car encourages some level of diligence too<span style="font-family: &quot;Calibri&quot;,sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: &quot;Times New Roman&quot;; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">&nbsp;–&nbsp;</span>one may want to take it for a test-drive. But is it healthy to expect or require each car buyer to have advanced engineering or mechanical skills and to test each part for herself?&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We argue it isn’t: such due diligence, while commendable, defeats the purpose. When buying a new car, a purchaser ought to be able to rest easy, relying on her property rights and on the manufacturer’s name and representations, and fairly assume that the parts used are new, in working order, and are <i><u>expected</u></i> (certainly by the manufacturer) to last.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Similarly, when buying a financial product that has been structured by a bank, it would promote market efficiency and be most expedient if investors were able to freely rely on representations and warranties made to them by the banks about the collateral supporting the product. And when a representation turns out to have been faulty, investors could then expect to have recourse through the court system – one of the very reasons overseas investors invest in US-based financial products!&nbsp; </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b><i>Decisions, Decisions…&nbsp;</i></b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">On the RMBS/CDO side, a recent lower court ruling and a slew of higher court rulings have ended favorably for plaintiffs, finding that the disclosures and disclaimers[4] &nbsp;provided were not specific enough – reversing decisions made by lower courts that those disclosures had been sufficiently specific.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Various groups of defendants, in different litigation matters, had regularly made the argument that they had disclosed that some of the thousands of loans that made their way into the mortgage pool may fail to comply with the representations and warranties made of them. Well that’s fair enough – there may have been a data error here or there that is yet to be discovered.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">But at the time of writing this disclosure that “some” loans “may” fail, the truth was very different. Often some loans were already failing (and known to have been failing) to meet one or more of the criteria needed to pass. Moreover, and importantly, it was even the expectation of some defendants at that time that several other loans would imminently be found to fail too.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In other words, several defendants made the weakest possible disclosure: that something may possibly happen. Meanwhile, defendants often already knew that it was happening, and often en masse. Disclosing that a violation may occur is different from disclosing (1) that violations are known to be occurring, or (2) that the procedures employed leave ample room for the occurrence of violations (and so forthcoming violations should be expected).[5]&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">As it happens, in some cases defendants had set up tests to identify noncompliance in loans sampled within the pool. When they found that a high percentage of the sampled loans failed to comply with the representations and warranties, they failed to re-examine the non-sampled loans, but waived them into the securitization trusts anyway. Thus, they knew, or should have known, that a high percentage of the non-sampled loans would fail to meet the criteria upon which they were being purchased into the trusts. In FHFA v Nomura, the court examined the true nature of the mortgage loans being waived into the trust as conforming collateral:&nbsp;</div><blockquote class="tr_bq" style="text-align: justify;"><i>"Measured conservatively, the deviations from originators’ guidelines made anywhere from 45% to 59% of the loans in each [supporting loan group] materially defective, with underwriting defects that substantially increased the credit risk of the loan."</i>[6]&nbsp;</blockquote><div style="text-align: justify;"><b><br /></b></div><div style="text-align: justify;"><b>Some Examples – Decisions Favorable to Plaintiffs&nbsp;</b></div><div style="text-align: justify;"><u><br /></u></div><div style="text-align: justify;">&nbsp; &nbsp; &nbsp;<u>Basis Yield v Goldman (CDO) [7]</u></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The First Department decided that the disclosures were “boilerplate statements” that failed to put the investors on notice of the nature of the risks inherent in the investment (as alleged by the plaintiffs) [8]. The court held that if “plaintiff's allegations are accepted as true, there is a ‘vast gap’ between the speculative picture Goldman presented to investors and the events Goldman knew had already occurred.”[9] &nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">&nbsp; &nbsp; &nbsp;<u>ACA v Goldman (CDO)</u>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In May 2015, the New York Court of Appeals – the state’s highest court – reversed an order by the Appellate Division, holding that “plaintiff here claims that defendant knew that [co-defendant] Paulson was taking a position contrary to plaintiff's interest, but withheld that information, despite plaintiff's inquiries.”[10]&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">&nbsp; &nbsp; &nbsp;<u>FHFA v Nomura (RMBS)</u>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In this bench trial, the court honed in on the direct issue at hand, ruling in favor of the plaintiff:&nbsp;</div><blockquote class="tr_bq" style="text-align: justify;"><i>“This case is complex from almost any angle, but at its core there is a single, simple question. Did defendants accurately describe the home mortgages in the Offering Documents for the securities they sold that were backed by those mortgages?”</i>[11]&nbsp;</blockquote><div style="text-align: justify;">&nbsp; &nbsp; &nbsp;<u>Basis Yield v Morgan Stanley (CDO)</u>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The court leaned heavily on several prior rulings[12] of the First Department which had recently rejected most of the contentions raised by Morgan Stanley, similar to those advanced in the same court.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In the court’s words, “The First Department held that New York law is ‘abundantly clear’ that ‘a buyer’s disclaimer of reliance cannot preclude a claim of justifiable reliance on the seller’s misrepresentations or omissions unless (1) the disclaimer is made sufficiently specific to the particular type of fact misrepresented or undisclosed; and (2) the alleged misrepresentations or omissions did not concern facts peculiarly within the seller’s knowledge.”&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In denying Morgan Stanley’s motion to dismiss, the court held that, assuming plaintiff’s allegations to be true, the disclosures “did not apprise investors that Morgan Stanley had deliberately sabotaged assets in the CDO to profit from its short positions.”[13]&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b><br /></b></div><div style="text-align: justify;"><b>Some Examples – Decisions Favorable to Defendants&nbsp;</b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">&nbsp; &nbsp; &nbsp;<u>HSH Nordbank v UBS AG (RMBS)</u>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">HSH Nordbank is one example of an RMBS ruling that went the way of defendants.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The court ruled that “Here, the core subject of the complained-of representations was the reliability of the credit ratings used to define the permissible composition of the reference pool. The reliability of those ratings was the premise on which the entire deal was sold to HSH. Far from being peculiarly within UBS's knowledge, the reliability of the credit ratings could be tested against the public market's valuation of rated securities.”&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In other words, plaintiff HSH could reasonably have uncovered that the ratings were misrepresented had HSH exercised the necessary due diligence.[14]&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">&nbsp; &nbsp; &nbsp;<u>Lanier v BATS (HFT)</u>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>Lanier</i>, a case concerning high-frequency trading (or HFT), presents a more recent set-back for plaintiffs.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Lanier’s argument, to a degree, is this: Lanier paid for time-sensitive trading information from NASDAQ; NASDAQ has other clients who paid more, and so they got this time-sensitive information before Lanier did, rendering the information stale and inaccurate by the time it arrived at Lanier’s desk. Lanier argues that he was not appropriately informed that he was being trumped – and that the spirit of the agreement was that nobody would get information before him.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">To use the court’s words, Lanier’s argument is that “when defendants make market data available to preferred data customers more quickly than other customers, they violate Regulation NMS, which is incorporated by reference into contracts between plaintiff Lanier and defendants.” In his words, he seeks “redress for a violation of a contractual commitment prohibiting defendants from providing earlier access to market data to Preferred Data Customers” and as a result, the sale of stale data to him.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In Lanier’s words, “The Preferred Data Customers are then able to cancel orders and execute trades before Subscribers [like Lanier] even receive the market data.”&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">But the court sympathized with the provision of what seems to us to be an extraordinarily <i>weak</i> form of disclosure. The court viewed the following paragraph in the subscription agreement to have been, in the court’s words, “pertinent.”&nbsp;</div><blockquote class="tr_bq" style="text-align: justify;"><i>“Neither NYSE, any Authorizing SRO nor the Processor (the “disseminating parties”) guarantees the timeliness, sequence, accuracy, or completeness of Market Data or other market information or messages disseminated by any disseminating party. No disseminating party shall be liable in any way to Subscriber or to any other person for (a) any inaccuracy, error or <u>delay</u> in, or omission of, (i) any such data, information, or message, or (ii) the transmission or delivery of any such data, information or message, or (b) any loss or damage arising from or occasioned by (i) any such inaccuracy, error, <u>delay</u> or omission, [or] (ii) non-performance . . . .” (emphasis added by the court) </i>[15]</blockquote><div style="text-align: justify;">The court also took particular comfort in the provision within the Nasdaq Subscriber Agreement of a disclosure that reads “STOCK QUOTES MIGHT NOT BE CURRENT OR ACCURATE” and grants the motion to dismiss, preventing any further discovery.[16]&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">&nbsp;Indeed Nasdaq warranted to Lanier that it would “endeavor to offer the Information as promptly and accurately as is reasonably practicable.” If we take plaintiff’s allegations to be true, as we must at the motion to dismiss stage, then clearly NASDAQ did not provide it to Lanier as promptly as reasonably practicable, and it knew it wasn’t doing so.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The court asserted that Lanier’s “argument misreads the Subscriber Agreements, which promise one thing: the provision of consolidated market data to Lanier and other subscribers like him. The contracts do not prohibit provision of the same data in different forms to different kinds of customers, whether in consolidated or unconsolidated form. And in general the duty of good faith and fair dealing does not provide a cause of action separate from a breach of contract claim, as “breach of that duty is merely a breach of the underlying contract.”&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Sadly, in rendering its opinion the court ignores the spirit of the agreement – the intent&nbsp;–&nbsp;and probably the content too.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">--------------------------------------------------------------------------</div><div style="text-align: justify;">FOOTNOTES</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[1] For example, in a bench trial (<u>FHFA v Nomura</u>), the court noted that no real defense was presented as to the inappropriateness of defendants’ actions. “Today, defendants do not defend the underwriting practices of their originators. They did not seek at trial to show that the loans within the SLGs were actually underwritten in compliance with their originators’ guidelines. At summation, defense counsel essentially argued that everyone understood back in 2005 to 2007 that the loans were lousy and had not been properly underwritten.” Opinion at page 267.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[2] Our goal here is to share a practitioner’s perspective. We do not provide advice of any kind&nbsp;–certainly not legal advice.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[3] As scientists we must disclose our awareness of several situations in which investments are made without the expectation of a directly positive return, above 0%. While such examples exist, they are in the great minority of investments. For example, 5-year Swiss government bonds currently yield negative 0.539%, and there do exist rational arguments for investing in a negative yielding instrument, including for lack of available alternatives.)&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[4] Hereafter, we will use the short-hand “disclosures” to describe both disclosures and disclaimers.&nbsp; </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[5] An argument could be made that disclosure is faulty when it describes an occurrence as a remote possibility, when it’s known to be likely or inevitable&nbsp;–&nbsp;akin to a form of false advertising. Such disclosure disguises the true nature of the possibility.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[6]&nbsp;Opinion at page 171&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[7] First Department decision and opinion at page 9 (1/30/2014)&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[8] In the court’s words “These disclaimers and disclosures, in our view, fall well short of tracking the particular misrepresentations and omissions alleged by plaintiff.”&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[9] A similar finding was made by the First Department in <u>Loreley v Citigroup</u>.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[10] ACA Financial Guaranty Corp., Appellant, v. Goldman, Sachs &amp; Co., Respondent, Paulson &amp; Co., Inc. et al., NY INDEX NO. 650027/2011; Court of Appeals, No. 49, at page 4 (5/7/2015). Importantly, the court notes that ACA’s case differs from a prior case, in which the plaintiffs "knew that defendants had not supplied them with the financial information to which they were entitled, triggering 'a heightened degree of diligence.'" (<u>Pappas v Tzolis</u>, 20 NY3d 228, 232-233 [2012], quoting <u>Centro Empresarial Cempresa S.A.</u> 17 NY3d at 279).&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[11] Opinion and order at page 7</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[12] Specifically, <u>Loreley v Citigroup</u>; <u>Loreley v Merrill Lynch</u>; <u>Basis Yield v Goldman</u>; and <u>CDIB v Morgan Stanley</u>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[13] For example, the court specifically notes that the disclosure that Morgan Stanley would be acting in ‘its own commercial interest’ was … insufficient to put the Fund on notice of Morgan Stanley’s intent to offload low-rated RMBS from its books.”&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[14] For what it’s worth, our opinion is that it is impractical to have to second guess every party to a transaction; and having tried to, we can argue that it is very difficult if not impossible for a non-rating agency expert (and possibly even for a ratings expert) to effectively reverse-engineer ratings agencies’ complex models&nbsp;–&nbsp;which are often black-boxes, driven by and reliant on internal assumptions&nbsp;that cannot be seen by the most sophisticated of users. Having said that, the court raised its concern that, according to its reading of the amended complaint, HSH may not have provided sufficient factual information to support such the allegation, in the court’s words, “that the credit rating conferred on a security by a rating agency did not necessarily correspond to the security's risk level as perceived by the market.”&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[15] Ruling at page 26</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">[16] Here we have the same issue: Does disclosing the <i>potential</i> for delays in data distribution appropriately notify the subscriber that the data provided to him was always or regularly or intentionally being delayed? Aside from the omissions complained of, this disclosure, itself seems untruthful. Is it not misleading to state that “a quote might not be current,” when knowing that it is not current? If one wanted to be honest, one would disclose: “quotes are not current – beware!”&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">--------------------------------------------------------------------------</div><div style="text-align: justify;">CASE CAPTIONS (links can be clicked to download opinions)</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u><a href="https://dl.dropboxusercontent.com/u/9736720/ACA%20Financial%20Guaranty%20%28Appellant%29%20v.%20Goldman%20Sachs%20%28Respondent%29%20%2049mem15-Decision%205-7-2015.pdf" target="blank">ACA v Goldman</a></u>: ACA Financial Guaranty Corp., Appellant, v. Goldman, Sachs &amp; Co., Respondent, Paulson &amp; Co., Inc. et al., NY INDEX NO. 650027/2011&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u><a href="https://dl.dropboxusercontent.com/u/9736720/Basis%20Yield%20Alpha%20Fund%20%28Master%29%20v.%20Goldman%20Sachs%20Group%2C%20Inc%20-%201st%20Department%20%28Appellate%29%201-30-2014.pdf" target="blank">Basis Yield v Goldman</a></u>: Basis Yield Alpha Fund (Master) v Goldman Sachs Group, Inc., NY INDEX NO. 652996/2011; 2014 NY Slip Op 00587&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u><a href="https://dl.dropboxusercontent.com/u/9736720/Basis%20v%20Morgan%20Stanley%20%28STACK%202006-1%29%20CDO%20%28MTD%29.pdf" target="blank">Basis Yield v Morgan Stanley</a></u>: Basis Yield Alpha Fund Master v Morgan Stanley, NY INDEX NO. 652129/2012&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u><a href="https://dl.dropboxusercontent.com/u/9736720/CDIB%20V%20MS.pdf" target="blank">CDIB v Morgan Stanley</a></u>: China Development Industrial Bank v Morgan Stanley &amp; Co. Incorporated et al, NY INDEX NO. 650957/2010&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u><a href="https://dl.dropboxusercontent.com/u/9736720/FHFA%20v.%20Nomura%20%28Quinn%29%20Opinion%20%26%20Order%20%28Cote%29%20in%20favor%20of%20FHFA%20%20%285-11-2015%29.pdf" target="blank">FHFA v Nomura</a></u>: Federal Housing Finance Agency (“FHFA”) v Nomura Holding America, Inc., et al, 11-cv-06201-DLC&nbsp; </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u><a href="https://dl.dropboxusercontent.com/u/9736720/HSH%20Nordbank%20AG%20v%20UBS%20AG%20%282012%20NY%20Slip%20Op%2002276%29.pdf" target="blank">HSH Nordbank</a></u>: HSH Nordbank AG v UBS AG et al, 2012 NY Slip Op 02276&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u><a href="https://dl.dropboxusercontent.com/u/9736720/Lanier%20%28on%20behalf%29%20v%20Bats%20et%20al%20%28Keller%20Rohrback%29%20Order%20-%20MTD%20granted%20%284-28-2015%29.pdf target="blank"" target="blank">Lanier v BATS</a></u>: HAROLD R. LANIER, on behalf of himself individually and on behalf of others similarly situated v BATS Exchange, Inc. et al, 14-cv-03865-KBF&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u><a href="https://dl.dropboxusercontent.com/u/9736720/Loreley%20Financing%20v%20Citigroup%20%20%28Kasowitz%29%20%20Appelate%20Ruling%20%205-8-2014.pdf" target="blank">Loreley v Citigroup</a></u>: Loreley Financing (Jersey) No. 3 Ltd., et al v Citigroup Global Markets Inc., et al, NY INDEX NO. 650212/2012; 2014 N.Y. Slip Op. 03358 (N.Y. App. Div. 2014)&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u><a href="https://dl.dropboxusercontent.com/u/9736720/Loreley%20Financing%20v%20Merrill%20Lynch%20et%20al%20%28First%20Department%29%20%285-8-2014%29.pdf" target="blank">Loreley v Merrill Lynch</a></u>: Loreley Financing (Jersey) No. 28, Limited v Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated, et al., NY INDEX NO. 652732/2011; 2014 NY Slip Op 03326 (N.Y. App. Div. 2014)&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b><br /></b></div><div style="text-align: justify;"><b>DISCLAIMER</b>: &nbsp;This blog has been posted for informational purposes only. &nbsp;PF2 does not provide advice of any kind.</div>PF2http://www.blogger.com/profile/13893025381406343985noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-39777779433137995082015-06-22T08:41:00.002-04:002015-06-22T08:48:19.969-04:00ForEx Settlements Nearing $12 Billion<div style="text-align: justify;">Settlements are coming out in droves for the alleged manipulation of foreign exchange benchmark rates since either 2008 or 2009 (depending on the settlement). &nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">These have primarily been concentrated on settlements with or fines imposed by regulatory bodies in the US and Europe, in two sets of November 2014 and May 2015*. &nbsp;But private litigation settlements are growing too, fast approaching the $2 billion mark.&nbsp;</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-Jn8aGQEvKes/VYW3S0BuTsI/AAAAAAAAATU/a2MeGC58BC0/s1600/FX%2BSettlements%2BJune%2B2015.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="434" src="http://1.bp.blogspot.com/-Jn8aGQEvKes/VYW3S0BuTsI/AAAAAAAAATU/a2MeGC58BC0/s640/FX%2BSettlements%2BJune%2B2015.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"></div><div style="text-align: justify;">Importantly, the civil proceedings may yet be in their earlier stages, as other class actions have since been filed, with those new plaintiffs** arguing that they would not fall within the scope of the existing behemoth,&nbsp;<i>In re Foreign Exchange Benchmark Rates Antitrust Litigation</i> Case No. 1:13-cv-07789-LGS (S.D.N.Y.).</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We'll keep you posted. &nbsp;And as always, help us out if you think we're missing anything! &nbsp;~PF2</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">-----------------------------------------------------------------------------------------------------</div><div style="text-align: justify;">* For more on this, visit our prior commentary at&nbsp;http://expectedloss.blogspot.com/2015/06/fx-settlements-new-admissions-on-bank.html</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">** See for example Taylor et al v. Bank of America et al, 15-cv-1350 (S.D.N.Y)</div>PF2http://www.blogger.com/profile/13893025381406343985noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-83064905102655266342015-06-01T12:32:00.000-04:002015-06-01T12:32:22.943-04:00FX Settlements — New Admissions on Bank Misconduct<div style="text-align: justify;">Another day, another FX settlement. What’s new? Well, actually a lot. The recent settlements, when you dig into them, provide a whole new array of material. First we will explore the background, and then we’ll get you to the new…&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The latest settlements between FX banks and regulators were filed on May 20. Five banks agreed to pay approximately $5.6 billion in fines to US and UK regulators relating to the rigging of FX rates, including several fix benchmark rates. JPMorgan, Citi, Barclays and RBS plead guilty to criminal charges for having “entered into and engaged in a combination and conspiracy to fix, stabilize, maintain, increase or decrease the price of, and rig bids and offers … in the foreign currency exchange spot market.” UBS avoided a guilty plea, and was only fined for breaking a prior non-prosecution agreement relating to LIBOR misconduct, as a reward for being the first to inform regulators of these FX activities.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">A Bloomberg news story in June 2013 provided the initial public information that there was a potential problem with FX benchmark fixes, particularly the WM Reuters London Fix. Since then numerous news stories and the November 2014 settlements with the CFTC, OCC, FCA (UK regulator) and FINMA (Swiss regulator) have described the communications between bankers at several major banks, conniving to rig FX benchmark rates -- including their use of group chats to share information on the fix trades that they would need to execute. These traders would communicate each other’s currency positions and customer orders for the upcoming fix and then determine the means to trade off of this information so that the banks could make profits at the expense of their customers. Some of the settlements provide examples of chat room conversations in which traders from multiple banks collude to manipulate the fix.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">This collusion at the London Fix is the focus of news reports and the regulators’ settlements with banks for good reason: fix trading constitutes a major portion of daily FX spot trading; fix rates are used world-wide to price many widely-held assets including mutual and pension funds; collusion is illegal and easily shown to have occurred based upon chat room communications; and the names of the chatrooms (e.g., the Cartel, the Mafia), and the lingo used within, make for entertaining media.&nbsp; </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b>New Revelations&nbsp; </b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">New areas of misbehavior are revealed in the new set of settlements and pleas. There is much less awareness of these than the fix-specific misconduct, so we’d like to underscore some of the more egregious patterns of behavior.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">This time around, the New York State Department of Financial Services (NY DFS) gets in on the act as well, tagging Barclays with a Consent Order. The NY DFS sheds light on some areas that are not covered in other plea agreements or settlements. For example, it stipulates that “Barclays conspired with other banks in order to coordinate trading … coordinate bid/ask spreads charged.”&nbsp;<span class="MsoEndnoteReference" style="font-size: x-small;">[1]</span><span style="font-size: x-small;">&nbsp;</span></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The DFS also highlights Barclays’ “misleading sales practices”<span class="MsoEndnoteReference" style="font-size: x-small;">[2]</span><span style="font-size: x-small;">&nbsp;</span>, as well as the fact that “The misconduct described in this Order was not confined to a small group of individuals; it involved more than a dozen employees, who acted with the knowledge and oversight of some senior desk managers, and spanned geographically across numerous countries.”<span class="MsoEndnoteReference" style="font-size: x-small;">[3]</span><span style="font-size: x-small;">&nbsp;</span>&nbsp;Moreover, the DoJ and DFS agreements include broader time ranges of misconduct than some of the earlier settlements, such as the CFTC’s.<span class="MsoEndnoteReference" style="font-size: x-small;">[4]</span><span style="font-size: x-small;">&nbsp;</span></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">So…what other wrongdoings were these FX trading engaged in?&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u>Manipulation of Spot Market to Profit from Client Orders&nbsp;</u></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Clients leave orders with their FX banks to execute FX spot trades, in order to manage their risks from future spot moves.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Banks have admitted to manipulating FX rates when near the order levels, in order to increase the banks’ profit at the customer’s expense. For example, banks admitted to “accepting limit orders from customers and then informing those customers that their orders could not be filled … when in fact the defendant was able to fill the order but decided not to do so because the defendant expected it would be more profitable not to do so….”<span class="MsoEndnoteReference" style="font-size: x-small;">[5]</span></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Likewise, NY DFS notes that Barclays told “clients that their orders had been only partially filled, when in fact the FX Sales employees were holding back a portion of the fill as the market moved in Barclays’ favor….”<span class="MsoEndnoteReference" style="font-size: x-small;">[6]</span><span style="font-size: x-small;">&nbsp;</span>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u>Providing Quotes with Dealer Markup to Clients Expecting to Hear “Direct Trader Quotes”&nbsp;</u></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">On large trades, some clients insist on hearing quotes not from their salesperson (who might add a spread to a trader quote), but directly from the bank trader over a phone line. Clients would expect these to be market-based -- and not shaded in one direction based upon the direction of the client’s intended trade. However, bank traders shaded the quotes either based upon hand signals from the salesperson indicating the direction and the size of the markup to include, or based upon earlier agreements made between the two bank employees.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">On this count, banks admitted to “including sales markup, through the use of live hand signals or undisclosed prior internal arrangements or communications, to prices given to customers that communicated with sales staff on open phone lines….”<span class="MsoEndnoteReference" style="font-size: x-small;">[7]</span><span style="font-size: x-small;">&nbsp;</span>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u>Disclosure of (Confidential) Customer Identities and Trade Activity to Other Market Participants&nbsp; </u></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Banks provided this information to other banks and even other customers, on both large fix and non-fix trades. According to the plea agreements, the banks disclosed “non-public information regarding the identity and trading activity of the defendant’s customers to other banks or other market participants….”<span class="MsoEndnoteReference" style="font-size: x-small;">[8]</span><span style="font-size: x-small;">&nbsp;</span>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u>Trade Platform Provided Altered Rates to Certain Customers&nbsp;</u></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The settlements were unclear on the relationship between the platforms and the bank, but platform rates provided to certain customers were systematically favorable to the bank versus the unaltered rates. RBS engaged in “intentionally altering the rates provided to certain of its customers transacting FX over a trading platform disclosed to the United States in order to generate rates that were systematically more favorable to the defendant and less favorable to customers….”<span class="MsoEndnoteReference" style="font-size: x-small;">[9]</span><span style="font-size: x-small;">&nbsp;</span>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u>Trading Ahead of a Corporate Transaction&nbsp;</u></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We find a new anecdote of RBS trying to move the currency rate ahead of a corporate transaction so as to favor the bank at the client’s expense. This is commonly known as front running.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">From the plea agreement: “… in connection with the FX component of a single corporate transaction, trading ahead of a client transaction so as to artificially affect the price of a currency pair and generate revenue for the defendant, and to affect or attempt to affect FX rates, and in addition misrepresenting market conditions and trading to the client….”<span class="MsoEndnoteReference" style="font-size: x-small;">[10]</span><span style="font-size: x-small;">&nbsp;</span>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><u>Manipulation of Emerging Markets Currency Pricing&nbsp;</u></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">&nbsp;“Barclays FX traders exchanged information about customer orders with FX traders at other banks…”<span class="MsoEndnoteReference" style="font-size: x-small;">[11]</span><span style="font-size: x-small;">&nbsp;</span>&nbsp;For example, “a Barclays FX trader explicitly discussed with a JP Morgan trader coordinating the prices offered for USD/South African Rand to a particular customer, stating, … ‘if you win this we should coordinate you can show a real low one and will still mark it little lower haha.’”<span class="MsoEndnoteReference" style="font-size: x-small;">[12]</span><span style="font-size: x-small;">&nbsp;</span>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b><br /></b></div><div style="text-align: justify;"><b>Conclusion&nbsp;</b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">These regulatory investigations have uncovered several different means used by traders to increase bank profits to the detriment of their customers, including by “providing false and misleading information to customers and markets.”<span class="MsoEndnoteReference" style="font-size: x-small;">[13]</span><span style="font-size: x-small;">&nbsp;</span>&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">As opposed to the FX market convention of adding a spread on each trade to generate bank profit (controllable by customer scrutiny of the rates), these investigations opened the window to the various layers of deceptive practices prevalent in the FX market, and the abuse of client confidentiality and trust. While the FX market has begun adjusting to the misconduct around the 4pm WM/R London fix, it is not yet clear whether banks have begun (internally) investigating some of the newly highlighted misbehavior.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">One additional feature of these settlements is the demand by regulators for additional compliance scrutiny of FX trading which will hopefully limit potential future misconduct. May we return all the stronger for it, and more robust!&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>About the Author&nbsp;</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Jonathan Wetreich has spent 20 years in the foreign exchange markets, beginning on the buy side with the Treasury Group at Honeywell International. There he was responsible for managing the foreign exchange risk to this multinational firm, which included trading in spot, forwards and options. At Brown Brothers Harriman, a private bank, his sell side positions included consulting with the senior management of corporations to improve their foreign exchange risk management and execution. Jonathan also spent several years there on the foreign exchange trading desk, working primarily with asset management firms, as well as spending time as an FX strategist. Jonathan also assisted asset management firms in managing their passive hedge programs. Since 2012 Jonathan has been an independent consultant, primarily to corporations on matters of foreign exchange risk management. In addition, he has consulted on FX litigation and to organizations attempting to further their understanding of corporate hedge programs. Jonathan received an MBA from Columbia Business School. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">------------------------------------------------------------------------------------</div><div style="text-align: justify;"><br /></div><div class="MsoEndnoteText" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[1]</span><!--[endif]--></span> NY DFS Consent Order, In the Matter of: Barclays Bank PLC, p.1<o:p></o:p></span></div><div class="MsoEndnoteText" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[2]</span><!--[endif]--></span> NY DFS Consent Order, In the Matter of: Barclays Bank PLC, p.2<span style="color: red;"><o:p></o:p></span></span></div><div class="MsoEndnoteText" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[3]</span><!--[endif]--></span> NY DFS Consent Order, In the Matter of: Barclays Bank PLC, p.6 ¶14<o:p></o:p></span></div><div class="MsoNoSpacing" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[4]</span><!--[endif]--></span> FCA “Relevant Period”: 1/1/2008 – 10/15/2013; CFTC “Relevant Period”: 2009 – 2012; FINMA “Period under Investigation”: 1/1/2008 – 9/30/2013; OCC “Relevant Period”: 2008 – 2013; Fed “Review Period”: 2008 – 2013; DoJ: 1/1/2008 and 1/1/2009 – 5/20/2015<o:p></o:p></span></div><div class="MsoNoSpacing" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[5]</span><!--[endif]--></span> See for example: Plea Agreement USA vs JPMorgan Chase &amp; Co. p.17 ¶13<o:p></o:p></span></div><div class="MsoEndnoteText" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[6]</span><!--[endif]--></span> NY DFS Consent Order, In the Matter of: Barclays Bank PLC, p.16 ¶ 56<o:p></o:p></span></div><div class="MsoNoSpacing" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[7]</span><!--[endif]--> </span>See for example: Plea Agreement USA vs Citicorp p.16 ¶13<o:p></o:p></span></div><div class="MsoEndnoteText" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[8]</span><!--[endif]--></span> See for example: Plea Agreement USA vs Barclays PLC p.18 ¶16<o:p></o:p></span></div><div class="MsoNoSpacing" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[9]</span><!--[endif]--> </span>Plea Agreement USA vs The Royal Bank of Scotland PLC p.17 ¶13<o:p></o:p></span></div><div class="MsoNoSpacing" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[10]</span><!--[endif]--></span> Plea Agreement USA vs The Royal Bank of Scotland PLC p.17 ¶13<o:p></o:p></span></div><div class="MsoEndnoteText" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[11]</span><!--[endif]--></span> NY DFS Consent Order, In the Matter of: Barclays Bank PLC, p.11¶33<o:p></o:p></span></div><div class="MsoEndnoteText" style="text-align: justify;"><span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[12]</span><!--[endif]--></span> NY DFS Consent Order, In the Matter of: Barclays Bank PLC, p.11 ¶34<o:p></o:p></span></div><div style="text-align: justify;"> <span style="font-family: inherit; font-size: x-small;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference">[13]</span><!--[endif]--></span> NY DFS Consent Order, In the Matter of: Barclays Bank PLC, p.2</span></div>PF2http://www.blogger.com/profile/13893025381406343985noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-58819458782863149972015-05-26T10:00:00.000-04:002015-05-29T13:10:09.900-04:00Illinois’ Candidates for Municipal Bankruptcy<div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><a href="http://www.ilga.gov/legislation/BillStatus.asp?DocNum=298&amp;GAID=13&amp;DocTypeID=HB&amp;SessionID=88&amp;GA=99" style="line-height: 1.295; text-align: justify; text-decoration: none;"><span style="color: #0563c1; font-family: Calibri; font-size: 15px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">House Bill 298</span></a><span style="font-family: Calibri; font-size: 15px; text-align: justify; vertical-align: baseline; white-space: pre-wrap;"> would allow Illinois municipalities to adjust their debts through the Chapter 9 municipal bankruptcy process. The bill, endorsed by Governor Bruce Rauner, is currently in the house rules com-mittee.</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If HB298 was enacted, which local governments might use the new bankruptcy option? To help answer this question, our team reviewed audited financial statements that (all but the smallest) municipalities must file. Most of these financial audits can be found on the state comptroller’s local government finance </span><a href="http://warehouse.illinoiscomptroller.com/" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">warehouse</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">.</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This article lists five municipalities that appear vulnerable based on information found in their audits. Among the indicators we considered were government-wide unrestricted net position and general fund balance. The first indicator shows the degree to which assets held by the government entity as a whole exceed its liabilities and are not locked up in buildings and other illiquid forms. The second indicator, general fund balance, focuses more narrowly on the government’s main fund – which is roughly analogous to an individual’s checking account. Low or negative general fund balances were cited in the bankruptcies of Vallejo and Stockton, California. It is worth noting that the five municipalities we identified are all located in Cook County, which also faces fiscal challenges. Our list does not include Chicago. Although that city’s financial struggles have made frequent headlines, several of its smaller suburbs appear to be in much greater fiscal distress. The five communities we identified are: Maywood, Sauk Village, Blue Island, Country Club Hills and Dalton.</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In its </span><a href="ftp://ftp.illinoiscomptroller.com/LocGovAudits/FY2013/01634532/13Audit01634532_01.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">2013 financial statements</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, The </span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: bold; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Village of Maywood</span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> reported an unrestricted net position of -$47.4 million, and a general fund balance of -$8.2 million. While we found a number of jurisdictions with negative balances, these levels are quite pronounced for a relatively small municipality. &nbsp;With general fund revenues of only $23.3 million and government-wide revenues of $44.1 million, it will take the village a long time to eliminate these shortfalls.</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The Village’s 2014 financials should have been available by now, but, its reporting has been </span><a href="http://thevillagefreepress.org/2014/07/10/maywood-doesnt-have-money-to-pay-the-bills-says-mayor-after-board-discovers-village-has-no-bond-rating/" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">chronically late</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. Moody’s </span><a href="https://www.moodys.com/research/MOODYS-DOWNGRADES-THE-VILLAGE-OF-MAYWOODS-IL-LONG-TERM-GENERAL-Rating-Update--RU_16859723" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">withdrew</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> the Village’s credit rating in 2011 citing a “lack of sufficient current financial and operating information”. Despite the lack of credit ratings, Maywood was able to </span><a href="http://emma.msrb.org/ER845032-ER656433-ER1061548.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">sell</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> $16.3 million of bonds earlier this year.</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In its </span><a href="ftp://ftp.illinoiscomptroller.com/LocGovAudits/FY2014/01651032/14Audit01651032_01.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">2014 financial statements</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, </span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: bold; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Sauk Village</span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> reported an unrestricted net position of -$36.7 million – a very large negative position considering that the village had only $29.6 million in assets and government-wide revenues of $13.4 million. Sauk Village also showed a negative general fund balance and unusually high interest costs. The village’s $2.1 million of interest expense accounted for over 15% of total revenue. In most of the Illinois municipalities we reviewed, the interest/revenue ratio was below 10%. To the extent that interest expenses crowd out spending on resident priorities, political leaders have an incentive to default on debt obligations as a way to shift spending to more popular purposes. Furthermore, the Village received an adverse audit opinion for its reporting of “Aggregate Remaining Fund Information” and a qualified opinion for its reporting of “Governmental Activities.” &nbsp;The Police Pension Fund information was not included and has not been subject to an actuarial evaluation since May 1, 2011.</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The City of </span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: bold; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Blue Island</span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> reported an unrestricted net position of -$15.2 million and a general fund balance of -$10.5 million in its </span><a href="ftp://ftp.illinoiscomptroller.com/LocGovAudits/FY2013/01605530/13Audit01605530_01.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">2013 financial statements</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> – the latest available. The negative general fund balance is especially pronounced because the city only recorded $16.3 million in general fund revenue during fiscal year 2013. The city’s negative net unrestricted position appears to be understated because Blue Island did not report an Other Post-Employment Benefit (OPEB) liability. Government accounting standards require that municipalities report the present value of unfunded OPEB obligations on their balance sheets. This failure to report OPEB obligations resulted in the city receiving a qualified opinion from its independent auditor.</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The City of </span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: bold; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Country Club Hills</span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> has yet to file audited financial statements for the 2013 fiscal year – making it the most delinquent filer among the municipalities we reviewed. &nbsp;The city’s </span><a href="http://countryclubhills.org/wp-content/uploads/2014/11/Audit_2012.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">2012 financial statements</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> show a slightly negative unrestricted net position and a large negative general fund balance. Further, the city’s auditor was unable to render an opinion on the accuracy of these statements, saying:</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-left: 36pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Since the City did not maintain an accurate accounting of its revenue, expense/expenditure, bank reconciliations, and other assets and liability accounts, and we were not able to apply other auditing procedures to satisfy ourselves as to those balances, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on these financial statements.</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">WGN Television has repeatedly unearthed financial irregularities in Country Club Hills. &nbsp;Most recently, the station </span><a href="http://wgntv.com/2014/12/16/wgn-investigates-shenanigans-in-country-club-hills-again/" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">reported</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> that Mayor Dwight Welch was being audited by the IRS for not declaring as income his personal use of a city vehicle. The station also reported that the mayor incurred large restaurant bills on a city credit card, and that the city mistakenly retained $6 million in tax revenue that was supposed to be remitted to Cook County.</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The </span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: bold; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Village of Dolton</span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> reported a small negative net unrestricted position in its </span><a href="http://emma.msrb.org/ER840256-ER655649-ER1057422.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">2013 financial statements</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> – the latest available. Although its general fund balance was positive, the amount was well below Government Finance Officers Association guidelines. GFOA recommends that a government maintain a balance equal to two months of expenditures. Dolton’s $1.3 million general fund balance would cover less than a month of general fund expenditures, which were $22.1 million for the 2013 fiscal year. Further, the village reported a $5.2 million general fund deficit. If this deficit persisted into 2014, Dolton may now be facing a negative general fund balance. Finally, the village also received an adverse audit opinion. According to the city’s independent auditor:</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-left: 36pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">We were unable to examine supporting documentation for numerous expenditures out of various funds of the Village. We were unable to test the Village’s allocation of certain revenues collected by the water fund but belonging to the general fund and sewer fund. We were unable to obtain an aged trial balance supporting the receivable balances in the water and sewer funds. We were unable to obtain sufficient support for certain local revenues. We were unable to determine whether a net pension obligation should have been recorded in the government wide statements with respect to the police and firefighters’ pension funds. We were unable to obtain supporting documentation for certain payroll related liabilities such as compensated absences. We were unable to determine whether a lack of infrastructure assets was the result of a failure to include such information on the financial statements or whether the infrastructure had been fully depreciated in prior years. Due to the omission of financial statements for the discretely presented component unit, we were unable to determine whether the omission is material to the financial statements of the Village nor were we able to perform any auditing procedures on the component unit. We were unable to obtain confirmation from legal counsel as to whether any known actual or possible litigation, claims and assessments should be recorded or disclosed in the financial statements. Finally, we were unable to determine whether bond proceeds from a prior year were spent in accordance with applicable ordinances and requirements.</span></div><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If HB 298 becomes law, these five communities may be among the first to utilize the municipal bankruptcy option. Regardless we hope that local leaders and active members of each community review the financial records we have referenced, and begin to pursue policies that bring their municipalities back from the brink. As </span><a href="http://www.reuters.com/article/2014/12/30/usa-detroit-bankruptcy-fees-idUSL1N0UE1LJ20141230" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Detroit</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> and </span><a href="http://www.reuters.com/article/2014/12/03/us-usa-municipals-sanbernardino-idUSKCN0JH1PM20141203" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">other cities</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> filing Chapter 9 have found, municipal bankruptcy is an expensive process that transfers community resources to lawyers and financial advisors. While it may be unavoidable, bankruptcy should always be treated as the least best option.</span></div><b id="docs-internal-guid-955a46e9-8d69-ca67-f5e9-89872f45a9ba" style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.295; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This article was written by Marc Joffe on behalf of </span><a href="http://www.civicpartner.com/" style="text-decoration: none;"><span style="background-color: transparent; color: #0563c1; font-family: Calibri; font-size: 15px; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">CivicPartner LLC</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 15px; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. &nbsp;CivicPartner is a Chicago-based startup that collects and analyzes government financial disclosures. Joffe is an independent researcher studying state and municipal fiscal conditions. </span></div><br />Marc Joffehttps://plus.google.com/102572265799554788902noreply@blogger.com2tag:blogger.com,1999:blog-3764912039741974037.post-18246561245426951332015-05-18T09:00:00.000-04:002015-05-18T09:07:47.987-04:00Is Chicago Really a "Junk" Issuer?<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Last week, Moody’s downgraded Chicago general obligation bonds into speculative (i.e., “junk”) territory. As a </span><a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2544949" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">critic </span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">of low municipal bond ratings, I saw a good opportunity to take Moody’s to task. But after diving into Chicago’s financial data, I’m not so sure. The data I compiled are in </span><a href="https://docs.google.com/spreadsheets/d/11xC3RvN94YTcakpL8NS39-PpwxtKY9H0lnJu47ZcZZg" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">this Google sheet</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: italic; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> and my analysis follows.</span></div><b id="docs-internal-guid-8a45113f-63cd-60af-62f1-a5c208609460" style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In April 2012, Moody’s affirmed Chicago’s general obligation municipal bond rating at Aa3. Just over three years later, this rating stands at Ba1 - a cumulative reduction of seven notches. Since Moody’s entire rating scale, which ranges from Aaa to C, contains a total of 21 notches, the Chicago ratings changes have been quite dramatic. The magnitude of this downgrade does not appear justified by changes in the city’s finances..</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When it affirmed Chicago’s Aa3 rating three years ago, Moody’s </span><a href="https://www.moodys.com/research/MOODYS-AFFIRMS-Aa3-RATING-ON-CITY-OF-CHICAGOS-IL-7775--PR_244366" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">wrote </span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">the following:</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: white; color: black; font-family: Arial; font-size: 12px; font-style: normal; font-variant: normal; font-weight: bold; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The affirmation of the Aa3 rating on Chicago's general obligation debt is supported by the city's long-standing role as the center of one of the nation's largest and most diverse economies; a tax base that remains very sizeable despite several consecutive years of estimated full valuation declines; significant revenue raising ability afforded by the city's status as an Illinois home rule community; and its closely managed use of variable rate debt and interest rate derivatives. These strengths are somewhat moderated by the city's persistent economic challenges, including elevated unemployment levels and a large foreclosure backlog; narrow, though improving, General Fund reserves; relatively low levels of expenditure flexibility, as a high percentage of the city's operating budget is dedicated to personnel costs for a heavily unionized workforce; and above average levels of slowly amortizing debt.</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Three years later, Chicago’s situation is about the same or slightly better. The city is still the center of a large and diverse economy and it continues to benefit from a strong revenue base. Although official property valuations (EAVs) are lower, both </span><a href="http://www.zillow.com/chicago-il/home-values/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Zillow </span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">and the </span><a href="http://us.spindices.com/indices/real-estate/sp-case-shiller-il-chicago-home-price-index" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Case-Shiller Index</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> show substantial property price gains since bottoming in early 2012. The city’s unemployment rate has also </span><a href="https://www.google.com/publicdata/explore?ds=z1ebjpgk2654c1_&amp;ctype=l&amp;strail=false&amp;bcs=d&amp;nselm=h&amp;met_y=unemployment_rate&amp;fdim_y=seasonality:U&amp;scale_y=lin&amp;ind_y=false&amp;rdim=country&amp;idim=city:CT1714000000000&amp;idim=country:US&amp;ifdim=country&amp;tstart=947923200000&amp;tend=1429081200000&amp;hl=en&amp;dl=en&amp;ind=false" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">fallen</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> substantially.</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Gradual economic improvement has brought rising revenues. According to the city’s </span><a href="http://www.cityofchicago.org/content/dam/city/depts/fin/supp_info/CAFR/2013/CAFR_2013.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">CAFR</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, its largest fund saw revenue grow from $2.8 billion in 2011, to $2.9 billion in 2012 and $3.0 billion in 2013. Unaudited figures in the city’s </span><a href="http://www.cityofchicago.org/content/dam/city/depts/obm/supp_info/2015Budget/OV_book_2015_ver_11-24.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">latest budget</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> show further growth to $3.1 billion in 2014 and a projected $3.5 billion in 2015.</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Although expenditure flexibility continues to be limited, Chicago has </span><a href="http://chicago.suntimes.com/chicago-politics/7/71/158836/emanuel-socks-city-retirees-with-40-percent-health-insurance-hike" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">cut </span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">its retiree health insurance costs by reducing premium support and shifting beneficiaries onto Obamacare. These cost saving moves are still being </span><a href="http://www.krislovlaw.com/assets/1/7/April_14_2015_Update_for_Retirees.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">litigated</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, but have yet to be overturned.</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Chicago’s pension funds are seriously underfunded, but that is nothing new. At the end of 2011, Chicago’s four pension funds had a composite funded ratio of 37.9% - based on market value of assets. At the end of 2013 (the latest date for which complete statistics), the funded ratio was little changed at 37.0%.</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">That said, Chicago’s pension costs are quite large relative to city revenues. In 2013, actuarially required pension contributions totaled $1.74 billion, or 22.3% of the city’s total revenues of $7.82 billion. &nbsp;This proportion is very high by national standards - higher, for example, than every single city in California.</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I am skeptical of Actuarially Required Contributions (ARC) as a solvency measure, because a city can, in theory, meet its pension obligations on a pay-as-you-go basis. In other words, the city’s pension funds can all have a zero percent funded ratio, and all pension benefits and administrative expenses can be paid out of revenues.</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But a review of Chicago’s benefit costs does not offer solace. In 2013, expenditures by the city’s four pension funds, totaled $1.84 billion, or 23.5% of total revenue. (Under current Illinois law, the city will have to pay much more than this in future years because it will be mandated to both meet existing pension obligations and raise its funded ratio to 90% by 2040).</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One solvency ratio I find especially useful is the sum of pension costs and interest expenses to total revenues. In studying Depression-era government bond defaults, I found that when interest expense exceeded 30% of revenue, default often occurred. Back then, pension expenses were not that significant - now they are much larger and they enjoy similar or even preferential legal treatment to debt service.</span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In 2013, Chicago reported $478 million in interest payments, amounting to 6.1% of revenue. If we add this expense to the cost of providing constitutionally protected pension benefits, we get a composite ratio of 29.6% - dangerously close to the 30% threshold.</span></div><b style="font-weight: normal;"><br /></b><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-96GVQM4BLS0/VVkwKHXh8HI/AAAAAAAABBc/M-HaBQRGqMg/s1600/Chicago%2BPension%2BExpenses%2B2013-2041.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="200" src="http://3.bp.blogspot.com/-96GVQM4BLS0/VVkwKHXh8HI/AAAAAAAABBc/M-HaBQRGqMg/s400/Chicago%2BPension%2BExpenses%2B2013-2041.jpg" width="400" /></a></div><b style="font-weight: normal;"><br /></b><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Even worse, the trend is not in the city’s favor. &nbsp;Each plan’s actuarial valuation contains projected benefit payments through at least 2041. If we add up these future expenses, we find that they are projected to grow by about 4% annually through 2023. After that, benefit cost growth decelerates, as “Tier 2” beneficiaries - who are entitled to reduced pension benefits - begin to retire. The benefit growth rate from 2013-2023 is faster than the rate of revenue growth the city experienced in the previous decade. Between 2003 and 2013, revenue grew from $5.75 billion to $7.82 billion - an annual rate of 3.1%, significantly slower than projected </span></div><b style="font-weight: normal;"><br /></b><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If its revenue growth trends continue, Chicago’s pension benefits and its interest expenses will exceed 30% of revenue later this decade. While this situation does not automatically trigger a default or bankruptcy, it leaves the city vulnerable in the event of an economic downturn. With so much of the city’s spending locked in, it would be faced with making deep service cuts or defaulting on its obligations in the event that revenue falls during a future recession.</span><br /><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So while Chicago’s situation is not much different than it was in 2012, the city’s fiscal status was and remains fairly dire. Although a seven notch cumulative downgrade seems inappropriate, the city’s current Ba1 rating does not seem very far off to me. Perhaps the problem lay with more with the city’s 2012 rating than the one it carries now.</span></div>Marc Joffehttps://plus.google.com/102572265799554788902noreply@blogger.com3tag:blogger.com,1999:blog-3764912039741974037.post-40847709209935708062015-05-15T10:01:00.000-04:002015-05-15T10:01:06.985-04:00Short Selling & the Squeeze<div style="text-align: justify;">In the aftermath of the 2-minute Swiss franc movement earlier this year -- and with so much attention surrounding the Herbalife short-squeeze (on Bill Ackman's Pershing Square) -- we have put together a short &amp; sweet presentation describing the concept of the short squeeze.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We have included some examples towards the end, like Sears stock in November 2014 and that "exciting" day when Volkswagen suddenly became the world's most valuable company: thanks to its stock jumping over 300% in a day.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Welcome to the world of short squeezes. May you never be on the wrong side!</div><br />&nbsp; <iframe frameborder="0" height="500" marginheight="0" marginwidth="0" scrolling="no" src="https://www.slideshare.net/slideshow/embed_code/key/2pZ7UKQVhY6lT7" width="595"></iframe> <br /><br />A brief thank you goes out to our outgoing intern Mr. Ferreira for his helpful work preparing this set of slides.PF2http://www.blogger.com/profile/13893025381406343985noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-89167627617773603062015-05-12T11:09:00.000-04:002015-05-29T15:43:05.819-04:00Flash Spoofing, and "Normal" Market Operations<div style="text-align: justify;">The <a href="http://1.usa.gov/1GgaYJ3" target="_blank">criminal case</a> filed by the DoJ against U.K. trader Navinder Sarao is the latest case to capture the media’s attention in what must be the early stages of a series of investigations into what we’ll broadly term “issues of market manipulation.”<br /><br />&nbsp;The potential for manipulative behavior has been garnering more attention over the past year since Michael Lewis’s “Flash Boys” more forcefully drew regulatory attention to issues around high frequency trading (HFT) activities and current market structures.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Regulators have received their fair share of criticism for taking nearly five years to investigate the Flash Crash, finally getting around to examining <i>orders</i>, and not just <i>executions</i>.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">While Mr. Flash Crash&nbsp;<a href="http://on.wsj.com/1H4GlXs" target="_blank">protests</a> that he has “not done anything wrong apart from being good at my job,” regulators clearly have their sights on spoofing. &nbsp;Just last week came <a href="http://www.cftc.gov/PressRoom/PressReleases/pr7171-15" target="_blank">news</a> of the CFTC bringing civil charges against two prop traders in the UAE for allegedly spoofing in the gold and silver futures markets. All of this comes on the heels of several other low-profile players charged with spoofing over the past couple of years, such as <a href="http://1.usa.gov/1zPuslR" target="_blank">Panther Trading</a>.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Spoofing, sometimes referred to as “hype &amp; dump,” is basically when a trader enters orders with the sole purpose of influencing market prices and with no intention of actually executing those orders.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Obviously the law does not require traders to openly state their intentions regarding whether they are buying or selling, and how much. Likewise, we don’t play poker with our cards face up. But what type of bluffing is kosher? To what lengths can one go to cloak his intentions so that others don’t run ahead, increasing transaction costs?<br /><br />Kraft was recently hit with a CFTC <a href="http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfkraftcomplaint040115.pdf" target="_blank">complaint</a> regarding its wheat futures trading, and this case seems to be more of a gray area.<br /><br /><i>But there's more to come, no doubt.</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The general areas of interest concern front-running, spoofing, time advantages, and trading on insider information. Just a couple of weeks ago, we saw a situation which must fall smack in the middle of the realm of the regulatory whip: the Aussie dollar moved significantly just (milliseconds) before the announcement by the Reserve Bank of Australia (RBA). But even worse – this has now happened three consecutive times!</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Let’s have a look at the overall movement, just before 3am, and then we’ll focus on the movement and its occurrence just before news came out.<br /><br />Here's the movement, generally, at 00:30.<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://2.bp.blogspot.com/-ca9BwsCVgWs/VVIRf7QjrFI/AAAAAAAAAtw/FGJwkvKOmcw/s1600/audusd%2B040715.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="392" src="http://2.bp.blogspot.com/-ca9BwsCVgWs/VVIRf7QjrFI/AAAAAAAAAtw/FGJwkvKOmcw/s640/audusd%2B040715.jpg" width="640" /></a></div><br />But the important note is the movement occurs just moments before (any) news is released. &nbsp;See all the news items at the top? &nbsp;Each news item corresponds to a blue box in the graph.<br /><br />The first one, the rate decision, "flashes" into our screen, just AFTER the movement.<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-AocSjFf77uk/VVIRnckuyKI/AAAAAAAAAt4/rSK528l0hWA/s1600/AUDUSD%2B040715%2Bnews%2Bafter%2Bthe%2Bmovement.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="364" src="http://3.bp.blogspot.com/-AocSjFf77uk/VVIRnckuyKI/AAAAAAAAAt4/rSK528l0hWA/s640/AUDUSD%2B040715%2Bnews%2Bafter%2Bthe%2Bmovement.jpg" width="640" /></a></div><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">It's worth mentioning that we're not alone in discovering this market movement. The Australian Securities and Investment Commission is on top of things, having opened an investigation into these wild, yet accurate, swings. &nbsp;Notices have purportedly "been sent to many financial institutions and platform providers to understand the basis of the trading on these markets at the point in time of interest." More troubling, however, is that <a href="http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-094mr-update-on-australian-dollar-movement-investigation/" target="_blank">preliminary findings</a> have revealed to ASIC that:<br /><blockquote class="tr_bq"><i>"moves in the Australian Dollar ahead of the announcement to be as a result of normal market operations in an environment of lower liquidity immediately ahead of the RBA announcement. The reduction in liquidity providers is a usual occurrence prior to announcement in all markets. Much of the trading reviewed to date was linked to position unwinds by automated trading accounts linked to risk management logic and not misconduct."&nbsp;</i></blockquote>Call us skeptical (or sceptical, given they're in Australia).<br /><br />One more likely explanation is that the news was leaked, or sold, to one or more firms that could execute quickly based on an incredibly fast network connection, likely linked to an algorithm. (If not, why wait for the seconds or milliseconds before the announcement – why not execute a minute before, or two minutes before?)&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">So that opens up the door to the question of “time advantages” – more specifically, whether some preferred clientele can buy early access to the news. Let’s just say, it’s a little like gambling on a football game, in which most people are watching on tape-delay, but some gamblers are allowed to see the game “real-time.” The real-time gamblers can add or remove bets once the game is really finished, while the other gamblers with the lagged connection don’t yet know the final result. Can we call that a rigged market?&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The next legal question becomes: do the ordinary gamblers know that the preferred gamblers have a time advantage, or whether they know that they’re on a lagged connection (and that others are not). In other words, there’s the question of proper disclosure. Whether or not the market is rigged in favor of some parties, should the “unfavored” parties have been made aware of their material disadvantage?<br /><br />--------------------------------<br /><br />For more on <b>Time Advantages in the Financial Markets</b>, and corrective actions taking place, visit any of the following links:<br /><br /><a href="http://www.bloomberg.com/news/articles/2015-05-10/the-short-seller-edge-that-hedge-funds-get-from-crucial-time-lag" target="_blank">The Crucial Piece of Information That Big Traders Get Before Everyone Else</a><br /><br /><a href="http://on.wsj.com/1immEvr" target="_blank">Firm Stops Giving High-Speed Traders Direct Access to Releases</a>: Warren Buffett Involved in Berkshire Unit Business Wire's Decision to End Practice<br /><br /><a href="http://bloom.bg/1hKqAUi" target="_blank">Traders May Have Gained Early Word on Fed Policy, Study Finds</a><br /><br /><a href="http://cnnmon.ie/1gGpG9i" target="_blank">Thomson Reuters ends early access to key market data</a><br /><br /><a href="http://on.wsj.com/1fDvhPa" target="_blank">Behind One Second of Trading Mayhem</a><br />(Article chronicles impact of earnings results released to paid clients milliseconds before news services released earnings, while those results impacted closing price of shares.)<br /><br /><br />&nbsp; </div>PF2noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-83392678236349982232015-02-24T09:04:00.000-05:002015-02-24T09:04:06.535-05:00Ocwen Wins this Weekend<div style="text-align: justify;">Shortly after our blog posting went out on Friday evening, Ocwen (OCN) and Nationstar (NSM) and affiliated companies announced two agreements that sent all of their shares higher.</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-KY7of669-os/VOyD_0dC56I/AAAAAAAAAgM/ns9HDfUQSHo/s1600/OCN-dollar%2Bprices.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-KY7of669-os/VOyD_0dC56I/AAAAAAAAAgM/ns9HDfUQSHo/s1600/OCN-dollar%2Bprices.PNG" height="182" width="640" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">It will be interesting to see if some of them come back today: the reasoning for the bounce isn't immediately clear -- certainly for some of the Ocwen affiliates (AAMC, ASPS and RESI) who might reasonably be expected to miss out on future revenue opportunities as a result of the sale of HLSS.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Or is this just a win-win-win-win-win-win-win?</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-E41sQF9eQY4/VOyD4lvB5lI/AAAAAAAAAf8/sWGF77wzHRk/s1600/OCN-NSM.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/-E41sQF9eQY4/VOyD4lvB5lI/AAAAAAAAAf8/sWGF77wzHRk/s1600/OCN-NSM.PNG" height="458" width="640" /></a></div><div style="text-align: justify;"><br /></div><br /><div style="text-align: justify;"><b>Ocwen selling MSRs to Nationstar</b> ($9.8 billion of loans).&nbsp;</div><div style="text-align: justify;">Link: http://www.bloomberg.com/news/articles/2015-02-23/ocwen-to-sell-9-8-billion-servicing-portfolio-to-nationstar&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b>New Residential (NRZ) to buy HLSS</b>: http://www.wsj.com/articles/new-residential-to-buy-home-loan-servicing-solutions-for-1-3-billion-1424692915?mod=yahoo_hs</div>PF2noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-52864772618207516892015-02-20T16:53:00.000-05:002015-06-18T08:46:37.160-04:00Serving Up the Servicing Complaints<div style="text-align: justify;">It's February 20th, and time to update <a href="http://expectedloss.blogspot.com/2014/02/mortgage-servicers-underserving.html" target="_blank">our post</a> from Feb. 20th last year, when we investigated state of the mortgage servicing arena.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Firstly the good news: overall, complaints for the year 2014 are down roughly 12% over 2013 levels.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Non-bank servicer Ocwen has been all the <a href="http://expectedloss.blogspot.com/2014/10/ocwen-letter-spooks-market.html" target="_blank">rage</a> of late, and has risen to the most complained-about mortgage servicer out there in 2014. &nbsp;Meanwhile many of the bank-servicers have decreased their servicing businesses and platforms -- often selling to non-bank servicers -- and with it their tally of complaints!</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Notably, Ocwen has settled with the CFPB and related state AGs for alleged misdeeds between 2009 and 2012. &nbsp;The settlement was to the tune of $2.1 bn, but much of this cost may well be absorbed by investors in RMBS trusts serviced by Ocwen. &nbsp;Importantly, though, Ocwen's complaint count seems only to be rising, and is now roughly 70% higher than in was in 2012.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Also of interest, if you look in the list below at the five servicers whose complaints grew fastest between 2012 and 2013, all five of them continued to have complaint growth in 2014. &nbsp;This unwelcome trends seems not to be abating. &nbsp;For example, for Select Portfolio Servicing, Inc (SPS) complaints more than tripled from 2012 to 2013. &nbsp;They're again up another 65% from 2013 to 2014.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">For another take on this, see Tom Adams' <a href="http://www.nakedcapitalism.com/2015/02/tom-adams-ocwens-servicing-meltdown-proves-failure-of-obamas-mortgage-settlements.html" target="_blank">interesting read</a> in <i>Naked Capitalism</i>, entitled&nbsp;"Ocwen’s Servicing Meltdown Proves Failure of Obama’s Mortgage Settlements."</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="http://2.bp.blogspot.com/-LIUJY8FrKtY/VOernC-6dmI/AAAAAAAAAfY/3Z1qKenGie8/s1600/CFPB-MortgageServicers%2Bfeb%2B2015.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="305" src="http://2.bp.blogspot.com/-LIUJY8FrKtY/VOernC-6dmI/AAAAAAAAAfY/3Z1qKenGie8/s1600/CFPB-MortgageServicers%2Bfeb%2B2015.png" width="640" /></a></div><div style="text-align: justify;"><br /></div>PF2noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-68974389533736774472015-02-03T08:00:00.000-05:002015-02-03T08:00:09.376-05:00S&P Settles: Now How About that US Bond Rating?<div style="text-align: justify;">In its settlement with the Department of Justice, S&amp;P has backed off its assertion that the federal lawsuit was filed in retaliation for its 2011 downgrade of US Treasury debt. But the downgrade subjected S&amp;P to a barrage of <a href="http://fivethirtyeight.blogs.nytimes.com/2011/08/08/why-s-p-s-ratings-are-substandard-and-porous/">criticism</a> both at the time and ever since, raising the question of whether the decision was appropriate. My view is that the downgrade was the correct credit decision in 2011, but that it is now time for S&amp;P to restore the US to AAA status.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Since rating agencies earn minimal revenue from sovereign ratings, the downgrade was clearly not in the firm’s short term commercial interest. This speaks well for the sovereign group and senior management at the time: the analysts looked the numbers, decided that the US was no longer a triple-A credit and were allowed to implement and publicize their decision. While we often hear negative generalizations about rating agencies, it is worth noting that these firms are heavily siloed; the behavior of the structured finance group does not necessarily reflect on the work of the sovereign team.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Not only was the downgrade principled, but it was also justified. In 2011, the US debt-to-GDP ratio was skyrocketing, the country had an unsustainable fiscal outlook and it lacked the political will to deal with the imbalance between future revenues and swelling entitlements arising from baby boomer retirements. While the <a href="http://www.nidirect.gov.uk/changes-to-the-planned-increase-in-state-pension-age">British</a> and <a href="http://snbchf.com/italy-euro-exit/full-list-of-monti-reforms/">Italian</a> governments were able to address population aging by raising taxes and delaying eligibility for social insurance programs, divided government in the US prevented a grand bargain from occurring here.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Further evidence that the US did not merit a top credit rating emerged in October 2013 when both parties engaged in brinkmanship over raising the debt ceiling. Had the debt ceiling not been raised, the Treasury would been forced to prioritize payments. While I believe that the Treasury would have prioritized debt service over other obligations, my confidence in this belief does not approach the 99.9%+ level normally associated with AAA ratings.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">So what has changed and why am I suggesting an upgrade? First, after taking widespread blame for the debt ceiling debacle, Republicans have changed tactics. It is now extremely unlikely that they will trigger a similar confrontation when the debt ceiling has to be raised again. Since failure to raise the debt ceiling and failure to prioritize debt service are both low probability events, the chances of both occurring seem to be within the AAA risk band.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">More relevant to S&amp;P’s original downgrade decision, the nation’s fiscal long term outlook has changed since 2011. When I say this, I am not referring to the marked decline in headline deficit numbers. The fact that the annual deficit declined from $1.3 trillion in fiscal 2011 to a projected $468 billion in fiscal 2015 is not a surprise. Looking back at <a href="https://www.cbo.gov/sites/default/files/01-26_fy2011outlook.pdf">CBO’s ten year projection from 2011</a>, the agency estimated a $551 billion deficit for the current fiscal year – pretty close to what we are actually seeing. While politicians from both parties may be congratulating themselves for this improvement, the downward deficit trend is exactly what one would expect from an improving economy. Rising tax revenues and lower unemployment insurance costs – not any major reform – are reducing the deficit. There was no grand bargain, nor is there likely to be one anytime soon.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">But two developments since 2011 have greatly altered the country’s longer term outlook: reduced healthcare cost inflation and persistently lower interest rates. Between 2000 and 2007, annual healthcare expenditure growth averaged 8.5%. Since 2009, the rate of growth has averaged only 3.9% and <a href="http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html">health expenditures have stopped rising as a percentage of GDP</a>. Back in 2011, the decline in health cost inflation could be dismissed as a temporary effect of the Great Recession – but now that it has persisted into the recovery, we apparently have a lower baseline rate. Since healthcare costs are such a large component of future federal spending, less cost escalation in this sector is a very important factor in the long term fiscal outlook.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Last year CBO <a href="https://www.cbo.gov/publication/45471">projected</a> that in 2039 the US debt/GDP ratio would reach 106% under current law and 183% under a likely set of alternative policies. As healthcare disinflation persists these forecast levels are likely to fall.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Lower interest rates should also slow the accumulation of debt. After years of recovery and many months after the end of quantitative easing, Treasury rates remain near record lows. Rather than assume that rates will return to pre-recession levels, it now seems more reasonable to assume that we have entered a new normal of ultra-low rates just as Japan did after 1990.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">While discussion around government solvency often revolves around a nation’s debt-to-GDP ratio, a better measure is the ratio of interest expense to revenue – because it focuses on the government’s ability to maintain debt service. Just after World War II, Britain reached a debt-to-GDP ratio of 250% but did not default because it faced very low interest rates. If interest rates remain low in the US, the federal government can comfortably service the 183% debt load envisaged by CBO’s most pessimistic scenario.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In 1991, the nation’s interest/revenue ratio peaked at 18% - but there was no discussion of a default. Currently, the ratio is below 8%. My <a href="http://mercatus.org/sites/default/files/Joffe_Illinois_v2.pdf">study</a> of fiscal history suggests that a Western style government becomes vulnerable to default once this ratio reaches 30%. While the US can always avoid a default by printing money, it is possible that an independent Fed Chair would refuse to do so, out of fear that the resulting price inflation would have worse consequences than a Treasury default.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Under the CBO’s most pessimistic scenario, the interest/revenue ratio reaches 46% in 2039, well into the danger zone. But this outcome assumes an average interest rate on federal debt of 4.85%. Right now this average is below 2% and falling as higher coupon bonds mature and are replaced by new low-rate issues. Even if the government’s average financing rate drifts up to 3%, its interest/revenue ratio will remain below the critical threshold.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">S&amp;P had good reason to downgrade the US in 2011. If health cost inflation and interest rates had returned to pre-recession historical norms, the case for the lower rating would still be strong. But now that we have entered a new normal of quiescent healthcare cost escalation and low interest rates, it appears that the US is due for an upgrade.</div>Marc Joffehttps://plus.google.com/102572265799554788902noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-10102681734099096612015-01-25T13:37:00.001-05:002015-01-25T13:37:57.182-05:00SEC Shines a Light on Inflated CMBS Ratings<span id="docs-internal-guid-2cf9129c-2237-bb04-187a-23d652f4e9b0"></span><br /><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span id="docs-internal-guid-2cf9129c-2237-bb04-187a-23d652f4e9b0"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">On January 21, S&amp;P </span><a href="http://www.sec.gov/news/pressrelease/2015-10.html#.VMFnd0fF-6U" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">settled</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;"> a number of complaints with the Securities and Exchange Commission as well as two states’ attorneys general. &nbsp;The issues primarily involved ratings of Commercial Mortgage Backed Securities (CMBS), although the rating agency also paid a relatively small fine for a self-reported lapse in its RMBS monitoring.</span></span></div><span id="docs-internal-guid-2cf9129c-2237-bb04-187a-23d652f4e9b0"><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">The settlements show that the SEC making use of the new regulatory powers it gained under Dodd-Frank and the earlier Credit Rating Agency Reform Act of 2006. While the complaints illustrate the fact that commercial considerations continue to affect credit ratings in the post-crisis era, regulators were able to identify and address (some of) them before another disaster occurred.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">The CMBS market is much smaller than RMBS market was in its heyday, so a wave of unanticipated CMBS defaults may not have been enough to trigger another financial crisis on its own. &nbsp;Nonetheless, it is nice to know that (some) misbehavior was caught early -- so we won’t have to find out.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Another difference between the contemporary CMBS market and the RMBS market of yore is greater competition. Six rating agencies currently vie for CMBS ratings mandates: &nbsp;the “Big Three” plus DBRS, Kroll and Morningstar. &nbsp;Neither Kroll nor Morningstar was around when bankers were shopping for higher RMBS ratings a decade ago.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">After S&amp;P temporarily suspended CMBS ratings in 2011, its market share position was quickly captured by Kroll. S&amp;P’s subsequent misstep - distorting a Great Depression data set to justify lower AAA credit enhancements – was likely motivated by the fear of being permanently dislodged from the top three in a highly profitable asset class. </span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Ironically, the SEC enforcement actions, which include a one year suspension of conduit CMBS ratings, will cement S&amp;P’s also-ran status. A takeaway here is one we have warned of many times previously: that more competition results in more ratings shopping by issuers and more pressure on rating agencies to dumb down their criteria - the type of concern that had motivated the </span><a href="http://www.franken.senate.gov/?p=issue&amp;id=280" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Franken Amendment</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">.</span></div><br /><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; font-weight: bold; vertical-align: baseline; white-space: pre-wrap;">Competition in the Market for Single-Asset CMBS</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">S&amp;P can still compete with the other players in rating single asset CMBS – a category that should worry any observer of the rating agency business. As the name suggests, single asset CMBS deals are collateralized by a mortgage on just one commercial property. The property can be an office building, a hotel or a shopping mall.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Typically investors in AAA structured finance paper have at least two protections: &nbsp;seniority and diversification. With AAA securities at the top of the heap, collateral defaults usually have to destroy most or all of the value of more junior securities before the AAA holders are impacted. The second protection afforded to AAA structured finance investors is diversification: &nbsp;the fact that the collateral pool contains a large number of loans whose risk attributes can be expected to offset one another.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Single asset CMBS deals kick this second protection away. &nbsp;If the one loan backing the deal stops performing and has to be liquidated at a large discount, all investors lose – including those holding AAA paper. &nbsp;The question in rating these deals is thus a fairly simple one: &nbsp;what are the odds that the property will suffer a catastrophic loss in value?</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">According to the </span><a href="http://globalriskguard.com/resources/crderiv/Moody%27s%20synthetic%20CDO.pdf" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Moody’s idealized default probability table</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">, the default probability on Aaa securities should be 0.0001% annually. &nbsp;For an instrument rated Aa1, the annual default probability should be 0.0006%. &nbsp;Differentiating between an event that has a 1 in 100,000 probability from one that has a 1 in 16,667 probability is difficult for any mere mortal – even one that happens to be employed by a credit rating agency.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">But is it really credible to believe that any given shopping mall has just a 0.0001% chance of a catastrophic decline in value? &nbsp;A brief review of recent history should refute this notion.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">We have already seen one shopping mall </span><a href="http://www.bbc.com/news/world-africa-29299596" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">devastated</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;"> by a terrorist incident. &nbsp;Although this tragedy happened in Nairobi, similar events are possible in the US which has already seen mass shooting incidents at </span><a href="http://www.washingtonpost.com/news/post-nation/wp/2015/01/17/shooting-in-florida-mall-leaves-one-person-dead-sends-shoppers-running-for-cover/" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Florida</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;"> and </span><a href="http://www.nydailynews.com/new-york/cops-converge-westfield-garden-plaza-reports-article-1.1506720" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">New Jersey</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;"> shopping centers. &nbsp;But shopping malls can easily be laid low without an act of violence. &nbsp;The closing of an anchor store or the opening of a competing mall can decimate traffic in short order. &nbsp;And these aren’t theoretical possibilities as one can see by perusing the </span><a href="http://www.deadmalls.com/" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Dead Malls website</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">. &nbsp;This site lists over 100 US shopping malls that have closed or become largely vacant in recent years. Indeed, the rise of standalone big box stores like Walmart and the increased popularity of online commerce have placed enormous pressure on the entire shopping mall business. &nbsp;Earlier this month, large tenants Macy’s and J.C. Penney both </span><a href="http://www.usatoday.com/story/money/business/2015/01/08/jc-penney-to-shutter-40-stores-lay-off-hundreds/21448085/" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">announced</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;"> the pending closure of tens of stores around the country.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">With such obvious risks, it’s hard to understand how a security collateralized only by a single shopping mall loan could be rated AAA. &nbsp;Yet despite previous defaults on AAA shopping mall loans (see below) we continue to see AAA single shopping mall deals in the aftermath of the financial crisis.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Interestingly, the two pre-crisis shopping mall transactions with defaulted AAA securities weren’t single loan transactions – but they were overly dependent on individual loans that went bad. &nbsp;Bear Stearns Commercial Mortgage Securities Trust 2007-PWR15 contained a loan to Las Vegas’ World Market Center II that accounted for </span><a href="http://edgar.sec.gov/Archives/edgar/data/1390269/000095013607001889/0000950136-07-001889.txt" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">12.3% of the deal’s collateral pool</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">. The default on this loan, in 2010, together with a large loss on the Aiken Mall in Aiken, SC have proved sufficient to trigger losses on the Aaa-rated AJ class.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">CSFB Commercial Mortgage Pass-Through Certificates Series 2005-C2 included an exposure to the Tri-County Mall in Cincinnati that </span><a href="http://edgar.sec.gov/Archives/edgar/data/1326717/000104746905015686/0001047469-05-015686.txt" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">accounted for nearly 10%</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;"> of its collateral pool. The liquidation of this mortgage at a deep discount eventually</span><a href="http://blogs.wsj.com/developments/2013/06/19/mall-mortgage-sale-shows-topsy-turvy-time-for-cmbs/" style="text-decoration: none;" target="_blank"><span style="color: #0563c1; font-size: 16px; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> inflicted losses</span></a><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;"> on AAA investors.</span></div><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Despite these cautionary tales, we now have at least seven post-recession deals, with 100% exposure to a single shopping center, carrying AAA senior ratings. &nbsp;These deals and their associated malls are as follows:</span></div><div dir="ltr" style="margin-left: -5.75pt;"><table style="border-collapse: collapse; border: none;"><colgroup><col width="184"></col><col width="212"></col><col width="192"></col></colgroup><tbody><tr style="height: 20px;"><td style="background-color: #d9d9d9; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Deal</span></div></td><td style="background-color: #d9d9d9; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Mall</span></div></td><td style="background-color: #d9d9d9; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Location</span></div></td></tr><tr style="height: 20px;"><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">AVMT 2013-AVM</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Aventura Mall</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Miami, FL</span></div></td></tr><tr style="height: 20px;"><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">BBCMS 2013-TYSN</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Tysons Galleria</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">McLean, VA</span></div></td></tr><tr style="height: 20px;"><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">BBUBS 2012-SHOW</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Fashion Show Mall</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Las Vegas, NV</span></div></td></tr><tr style="height: 20px;"><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">CGCMT 2013-SMP</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Santa Monica Place</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Santa Monica, CA</span></div></td></tr><tr style="height: 20px;"><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">COMM 2013-GAM</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Green Acres Shopping Center</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Valley Stream, NY</span></div></td></tr><tr style="height: 20px;"><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">MSC 2012-STAR</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">North Star Mall</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">San Antonio, TX</span></div></td></tr><tr style="height: 20px;"><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">MSC 2013-ALTM</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Altamonte Mall</span></div></td><td style="background-color: white; border-bottom: solid #000000 1px; border-left: solid #000000 1px; border-right: solid #000000 1px; border-top: solid #000000 1px; padding: 0px 8px 0px 8px; vertical-align: bottom;"><div dir="ltr" style="line-height: 1; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">Altamonte Springs, CA</span></div></td></tr></tbody></table></div><br /><div dir="ltr" style="line-height: 1.0791666666666666; margin-bottom: 8pt; margin-top: 0pt; text-align: justify;"><span style="font-size: 16px; vertical-align: baseline; white-space: pre-wrap;">If readers are aware of others, please pass them along.</span></div></span>Marc Joffehttps://plus.google.com/102572265799554788902noreply@blogger.com1tag:blogger.com,1999:blog-3764912039741974037.post-60263112580713610732014-12-04T17:26:00.000-05:002014-12-04T17:26:12.941-05:00High Frequency Hiccups<div style="text-align: justify;">This week has been an interesting one in the world of HFT worries...</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Citigroup, somewhat surprisingly, announced the closure of its premier alternative trading system, or ATS, called LavaFlow. &nbsp;LavaFlow had been the subject of regulatory scrutiny, leading up to a <a href="http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370542371114#.VIDH9THF-EU" target="_blank">small settlement</a> with the SEC back in July.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Citigroup maintains at least two other ATSs or ECNs, much smaller in size than LavaFlow. &nbsp;LavaFlow, despite some negative press associated with the July settlement, had gained significant traction recently -- see the table of weekly flow, below -- which makes its closure all the more intriguing.</div><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-D61UdW_4BHk/VIDM39FcQtI/AAAAAAAAAbI/EWt41x4tARk/s1600/ATS%2BShare%2BVolume%2B120414.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/-D61UdW_4BHk/VIDM39FcQtI/AAAAAAAAAbI/EWt41x4tARk/s1600/ATS%2BShare%2BVolume%2B120414.png" height="640" width="461" /></a></div><br /><div style="text-align: justify;">Citigroup reportedly explained that "Following a recent review of the LavaFlow ECN, we have decided that our capital, resources and efforts would be better redeployed to other areas within Citi’s Equities Division, ..."</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Citi had previously spent heavily to get into the game. &nbsp;We dug up a couple of their multi-million dollar purchases from 2007 and before that, including the $680mm purchase of Automated Trading Desk LLC. &nbsp;The newly shut down LavaFlow likely took over the reins from Lava Trading, a division bought from Knight Capital back in July 2004, purportedly to "<a href="http://www.wallstreetandtech.com/exchanges/will-citigroup-acquisition-spoil-lava-tradingandrsquos-neutrality/d/d-id/1256587?" target="_blank">catapult [Citigroup] to a leading position in the electronic-execution arena</a>."</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Barclay's dark pool, the subject of one of our earlier&nbsp;<span id="goog_1058585041"></span><a href="http://expectedloss.blogspot.com/2014/07/the-tradings-trailing-off.html" target="_blank">post<span id="goog_1058585042"></span>s</a>, continues to grow, although it remains a fair share away from its lofty heights of early June.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Meanwhile the SEC is purportedly nearing the end of a lengthy investigation into the way BATS Global's Direct Edge Holdings LLC exchanges handled customer orders. &nbsp;Among the concerns are whether all parties were allowed access to the same information about how the order types worked (or would be executed) and the order of execution among various open orders -- and whether they were indeed executed as they were advertised to be executed. &nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We'll blog more on this issue in the coming months, as order types are an area of significant regulatory investigation, in addition to the focus on <a href="http://expectedloss.blogspot.com/2014/11/broker-order-routing-in-high-frequency.html" target="_blank">how or where brokers choose to execute their trades, as we covered previously</a>.</div><br />PF2noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-16234369348578222302014-11-20T15:22:00.000-05:002014-11-20T15:22:13.469-05:00California Municipal Default Probabilities and a Reply to Lumesis<div style="text-align: justify;"><span style="font-family: inherit;">Earlier this month, we published default probability scores for 490 California cities and counties using a municipal scoring model I developed during previous research. The scores and a description of the model can be found on the <a href="http://californiapolicycenter.org/californias-most-financially-stressed-cities-and-counties/">California Policy Center’s website</a>. The methodology – which relies solely on financial statement data – is further justified in <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2258801">this</a> academic paper.</span></div><div style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div style="text-align: justify;"><span style="font-family: inherit;">The accompanying CPC study identified thirteen cities that had heightened risk of default or bankruptcy. The median city in the universe had a one year default probability of 0.11%, while cities in this highly distressed category had default probabilities of 0.74% and up. </span></div><div style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div style="text-align: justify;"><span style="font-family: inherit;">Our findings were <a href="http://www.latimes.com/local/california/la-me-1107-distressed-cities-20141107-story.html">reported</a> in the Los Angeles Times and produced rebuttals from two of the cities on the distressed list – Compton and San Fernando.</span></div><div style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div style="text-align: justify;"><span style="font-family: inherit;">We also received a rebuttal from an unexpected source: a municipal bond analytics provider named Lumesis. In a November 10th <a href="http://www.lumesis.com/commentary-blog/2014-commentary/11-10-2014-credit-scoring-algorithm-in-california-drought-impact-on-beef-prices-and-more-on-nysta-evasiveness">commentary</a>, they compared our county default probabilities to their Geo Scores, which measure relative economic health. Finding little correlation between the two sets of results, Lumesis concluded that our model “needs improvement”.</span></div><div style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div style="text-align: justify;"><span style="font-family: inherit;">But this conclusion begs a fundamental question: are municipal bond investors better served by socioeconomic metrics like those provided by Lumesis or by metrics that rely upon financial statement data? Even our colleagues at Lumesis appear to recognize that economic health is not conclusive, noting the “ability of bad management to create a mediocre credit from a strong economy.”</span></div><div style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div style="text-align: justify;"><span style="font-family: inherit;">Fortunately, we have some empirical evidence at hand to assess the relative strength of fiscal and economic predictors. Back in December 1994, Orange County California filed for bankruptcy. Thanks to the magic of the MSRB’s EMMA system, I was able to locate the County’s 1993 and 1994 financial statements –as appendices to old offering documents.</span></div><div style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div style="text-align: justify;"><span style="font-family: inherit;">For the reader’s convenience, I have posted the statements <a href="http://www.publicsectorcredit.org/oc/CA_Orange_County_FS_1993.pdf">here</a> and <a href="http://www.publicsectorcredit.org/oc/CA_Orange_County_FS_1994.pdf">here</a>. Next I input relevant numbers from the statements into my fiscal scoring tool which you can see <a href="https://docs.google.com/spreadsheets/d/1xC5U3GzkaZUrnGUCyF5Z2lPypXoC3tpQxm7IjL9pPBI/edit?usp=sharing">here</a> and in the screenshot below. </span></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;"><a href="http://3.bp.blogspot.com/-ru2dYdqLdfU/VG4-d6MGANI/AAAAAAAAA_w/0jOFZlSVxy0/s1600/oc1994.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/-ru2dYdqLdfU/VG4-d6MGANI/AAAAAAAAA_w/0jOFZlSVxy0/s1600/oc1994.jpg" height="384" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><span style="font-family: inherit;">The result was a default probability of 0.85%, well above the current median and comparable to the worst performing entities in the current universe. As of June 30, 1994, the County had a negative general fund balance and had experienced declining year-on-year governmental fund revenues – two harbingers of trouble we have seen in other default and bankruptcy cases.</span></div><div style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div style="text-align: justify;"><span style="font-family: inherit;">Would the Geo score have singled out Orange County in this way? Perhaps Lumesis can run the numbers for us and report back. Short of that, I note that according to <a href="https://www.census.gov/hhes/www/income/data/1990census/cphl123p.html">1990 Census figures</a>, Orange County had the 5th highest per capita income among California’s 58 counties. So it would seem that a methodology based solely on economic health (like the Geo score) would have missed this particular calamity.</span></div>Marc Joffehttps://plus.google.com/102572265799554788902noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-10730360079151246742014-11-17T08:45:00.000-05:002014-11-17T08:45:00.684-05:00Broker Order Routing, in a High Frequency Trading World<div style="text-align: justify;">The brokers/dealers have had their fair share of scrutiny among the recent revelations in the high-frequency trading (HFT) saga.</div><div><div style="text-align: justify;"><br /></div></div><div><div style="text-align: justify;">Among the questions being asked are whether Brokers are routing orders to whichever venues pay them most handsomely for the flow ... and potentially not to whichever venue provides best execution for their clientele.</div></div><div><div style="text-align: justify;"><br /></div></div><div><div style="text-align: justify;">We previously covered the <a href="http://expectedloss.blogspot.com/2014/06/well-promise-you-best-execution-for-us.html" target="_blank">discount brokerage world</a> in which TD Ameritrade is being sued</div></div><div style="text-align: justify;">(see for example <i>Gerald J. Klein, on behalf of himself and all similarly situated v. TD Ameritrade et al</i>, 14-cv-05738) for their order routing decisions.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">You may recall that shortly after New York's AG filed a complaint against Broker Barclays in June 2014 for issues relating to its dark pool, Broker Barclays saw a <a href="http://expectedloss.blogspot.com/2014/07/the-tradings-trailing-off.html" target="_blank">precipitous decline</a> (of roughly 66%) in trading within its own dark pool. &nbsp; Some of that has returned, but while the tide has turned and the "true" nature of trading activity in some of the dark pools has been revealed, others like <a href="http://www.reuters.com/article/2014/10/16/us-wells-far-darkpool-idUSKCN0I52WA20141016" target="_blank">Wells Fargo</a> have had to shut their dark pools: each venue requires a certain amount of trading activity to be relevant, or advantageous.</div><div style="text-align: justify;"><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-3mnSm6SHpts/VGeAIvZsCLI/AAAAAAAAAZo/xsICiDN5VNg/s1600/Broker_order_routing.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-3mnSm6SHpts/VGeAIvZsCLI/AAAAAAAAAZo/xsICiDN5VNg/s1600/Broker_order_routing.PNG" height="300" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Brokers' Routing Decisions - Where to Send the Trades</td></tr></tbody></table><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Today we're covering a little of what we've found in the brokerage world itself: the changing nature of Brokers' routing orders to their own dark pools. We're spent some time digging through order broker routing information in their quarterly Rule 606 reports, and found some interesting changes in the regularity with which some of the large brokers are routing "non-directed" orders -- orders for which the client hasn't specified a specific execution venue.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The data are sparse, and the time periods short, but it seems like Credit Suisse (which has the largest dark pool) is generally substantially increasing its order routing to its internal dark pool, while Goldies and Broker Barclays are generally decreasing their self-routing decisions.</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-3tsvnmrb2Ag/VGeQVesEF4I/AAAAAAAAAZ4/sRaNKp_1hNI/s1600/Self-routing-to-internal-dark-pool.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-3tsvnmrb2Ag/VGeQVesEF4I/AAAAAAAAAZ4/sRaNKp_1hNI/s1600/Self-routing-to-internal-dark-pool.PNG" height="640" width="532" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"></div>PF2noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-55246596663433941102014-11-10T15:41:00.000-05:002014-11-10T15:42:51.281-05:00Minimum Authorized Denominations: A Truly MAD Restriction Now Enforced by the SEC<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Last week, the SEC </span><a href="http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370543350368#.VF-XvPnF-6U" style="text-decoration: none;" target="_blank"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">sanctioned</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> thirteen brokerage firms for selling individual investors Puerto Rico General Obligation bonds in denominations less than $100,000. &nbsp;The action is part of a wider SEC effort to protect municipal bond investors, which has also included pressuring issuers to post their continuing disclosures on <a href="http://emma.msrb.org/" target="_blank">EMMA</a> and censuring issuers that have improperly reported their pension obligations.</span></div><b id="docs-internal-guid-4e8ced2b-9573-f663-5cb2-728011fc586a" style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">While the SEC’s efforts to enforce transparency are welcome, the enforcement of minimum denominations is, in my view, counterproductive. Before I explain why, I should begin with the necessary disclosure: &nbsp;I am an owner of Puerto Rico General Obligations, so I clearly have a financial interest in taking the view I am advocating. &nbsp;However, it is not a very large financial interest – probably not large enough to justify the time spent writing this piece.</span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">You see, I own an “odd lot” of Puerto Rico GOs. &nbsp;In fact, my purchase of $25,000 face value Puerto Rico bonds was legal in January 2014 when I made it, and would still be legal today. The $100,000 Minimum Authorized Denomination (MAD) restriction only applies to bonds issued in 2014 (and probably thereafter). &nbsp;An individual investor can still purchase smaller amounts of PR GOs that were issued prior to 2014. &nbsp;Many of these bonds mature in the 2030s, thus presenting risk characteristics very similar to the March 2014 MAD bonds, which mature in</span><span style="font-family: Arial; font-size: 15px; line-height: 1.15; white-space: pre-wrap;"> July 2035.</span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The reason for this discontinuity is that the SEC is enforcing a restriction in the </span><a href="http://www.gdbpr.com/investors_resources/documents/bondresolutionfinal-mar112014.pdf" style="text-decoration: none;" target="_blank"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Commonwealth’s bond resolution</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> that authorized the issuance of the 2014 securities. &nbsp;That resolution includes the following:</span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-left: 36pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i>The Bonds … shall be issuable … in the minimum denomination of $100,000, with integral multiples of $5,000 in excess thereof; provided, however, that upon receipt by the Registrar from the Secretary of written evidence from any of Fitch Ratings, Moody’s Investors Service, or Standard &amp; Poor’s Rating Services that the Bonds have been rated “BBB-,” “Baa3,” or “BBB-,” or higher, respectively, then the minimum authorized denomination of the Bonds shall be reduced to $5,000.</i></span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Prior to 2014, Puerto Rico carried investment grade ratings from the big three credit rating agencies, so earlier resolutions apparently did not need to incorporate the $100,000 denomination floor. Thus, investors can and do continue to trade these securities in smaller pieces as </span><a href="http://emma.msrb.org/IssueDetails/Trades/ER343097" style="text-decoration: none;" target="_blank"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">anyone can see</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> on EMMA.</span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Buying older PR bonds is not the only way for an individual investor to evade the new MAD requirement. Since many municipal bond funds own PR GOs, one can gain exposure to this asset by purchasing shares in any one of these funds. Not only can the investment be less than $100,000 in most cases, but the exposure to PR will only be a small fraction of the fund’s overall exposure.</span></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But why should investors have to pay mutual fund overheads to add Puerto Rico exposure to their portfolios? &nbsp;It should be possible to simply buy a small amount of PR bonds directly as part of a diverse municipal bond portfolio or multiple asset class portfolio.</span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The MAD restriction begins to foreclose that option to all but the wealthiest investors. Imagine, for example, an accredited investor with $5 million in investable funds. &nbsp;Let’s say that, after reading all of Puerto Rico’s</span><a href="http://emma.msrb.org/IssueView/IssueDetails.aspx?id=ER343097#tabs3" style="text-decoration: none;" target="_blank"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> voluminous disclosures</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, she decides to take some risk on Puerto Rico, but to limit this risk to 1% of her portfolio. &nbsp;If worst comes to worst, and Puerto Rico repudiates its bonds, she will still have $4.95 million – enough to survive. But, since 1% of $5,000,000 is only $50,000, that investment choice is not available for the 2014 and future bonds.</span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Many hedge funds and other institutional investors thought Puerto Rico’s March 2014 bonds to be a sensible investment, concluding that the 8.7% yield more than compensated them for the Commonwealth’s heightened risk. That issue was five times oversubscribed, with hedge funds being major participants. &nbsp;The question is why anyone else who shares this view must be compelled to pay a hedge fund </span><a href="http://www.investopedia.com/terms/t/two_and_twenty.asp" style="text-decoration: none;" target="_blank"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">“two and 20”</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> to express this conviction.</span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Besides being discriminatory and easily circumvented, the MAD restriction is just bad public policy. Investors can buy small denominations of penny stocks which frequently become worthless, so why single out PR General Obligations as something from which the “little guy” must be protected? It furthers the false narrative that municipal bonds are an especially risky asset class, when, in fact, quite the opposite is true. &nbsp;No US city, county, state or territory filed for bankruptcy in the last year. &nbsp;How does that compare to the corporate sector?</span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Municipal bonds were recently</span><a href="http://mathbabe.org/2014/09/11/guest-post-new-federal-banking-regulations-undermine-obama-infrastructure-stance/" style="text-decoration: none;" target="_blank"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> proscribed</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> by regulators from the list of high quality liquid assets that banks could hold. &nbsp;The major justification for excluding munis was their lack of liquidity. Regulatory actions that scare investors away from municipal bonds and impose floors on trade sizes simply reinforce the lack of liquidity in the market. &nbsp;This, at a time when we hear that Republicans and Democrats agree on the need for </span><a href="http://www.reuters.com/article/2012/01/31/us-usa-congress-infrastructure-idUSTRE80U03Z20120131" style="text-decoration: none;" target="_blank"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">greater infrastructure investment</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> – investment that could be partially financed by municipal bonds.</span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Finally, the MAD restriction uses credit rating agency assessments to determine whether the bonds are “junk” and thus subject to the denomination floor. Using bond ratings to distinguish between investment grade and non-investment grade securities goes against the spirit of Dodd Frank, which sought to </span><a href="http://www.sec.gov/spotlight/dodd-frank/accomplishments.shtml#credit" style="text-decoration: none;" target="_blank"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">cleanse regulations</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> of their reliance on credit ratings. This aspect of Dodd Frank is one of the few parts of the controversial law that seems to have elicited bipartisan support.</span></div><b style="font-weight: normal;"><br /></b> <div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: Arial; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">While it is gratifying that the SEC is trying to protect municipal bond investors, we need to be sure that the rules being enforced actually contribute to investor welfare. Puerto Rico’s MAD requirement is a restriction that is easily circumvented, that penalizes individual investors, that reduces municipal bond market liquidity and that reinforces the credit rating oligopoly. &nbsp;For these reasons, it fails the test of being a rule worthy of commanding enforcement resources.</span></div><br />Marc Joffehttps://plus.google.com/102572265799554788902noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-45318730432808668682014-10-24T08:55:00.001-04:002014-10-24T08:55:06.999-04:00San Francisco Mortgage Eminent Domain Plan - A Look at the Target Properties<div style="text-align: justify;">On October 28, San Francisco Supervisors will consider forming a Homeownership Stabilization Authority with the city of Richmond. The Authority would have the ability to condemn residential mortgages as a way of keeping financially distressed owners in their homes. The focus would be on underwater properties with mortgages held in private loan securitizations; federally owned or guaranteed mortgages would be excluded.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I was surprised to learn that San Francisco has a problem with underwater mortgages. According to <a href="http://www.zillow.com/san-francisco-ca/home-values/" target="_blank">Zillow</a>, the median home price in the City by the Bay peaked at $822,000 in 2007, bottomed out at $667,000 in late 2011, and has now reached $979,000 - 19% above the pre-recession high.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The Board of Supervisors' resolution states that San Francisco has approximately 300 underwater mortgages in private loan securitizations and that these are concentrated in "historically Black, Latino and Asian working class communities."&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Supporting documentation in the Supervisor's <a href="https://sfgov.legistar.com/View.ashx?M=F&amp;ID=3292863&amp;GUID=81604911-A9CA-494B-9F85-A3FCC5687A14" target="_blank">agenda packet</a> includes a memo from ACCE Action stating that 279 San Francisco mortgages have LTV (loan-to-value) ratios of 107% or more. The memo breaks these mortgages down by zip code - with the highest concentrations in 94112 and 94124.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">These two zip codes are in less affluent sections of the city where real estate prices have not performed as well as they have in the "hottest" neighborhoods. &nbsp;That said, property in these zip codes is not seriously depressed by historical standards. In 94124 - which has seen the worst price performance - <a href="http://www.zillow.com/san-francisco-ca-94124/home-values/" target="_blank">Zillow </a>shows a median home value of $609,000 compared to a pre-recession peak of $635,000. Further, Zillow forecasts that within a year, the median will reach $636,000 - roughly equaling its previous peak. In 94112, Zillow only reports selling prices per square foot, and these have fully recovered from the recession.<br /><br /><b>Looking Beneath the Cover - Examining the Data</b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">To learn more about San Francisco's underwater mortgages, I filed a public records request with the Mayor's Office of Housing and Community Development. &nbsp;They provided the 279 mortgages in an Excel file along with other lists and correspondence. &nbsp;There is a lot of material to work through, but I thought I would share some initial findings.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">First, unlike in the case of Richmond, there are no property addresses, so it will not be possible to map the properties unless and until the list is matched against a public records database. CoreLogic and some other companies perform this sort of matching, but normally charge substantial fees for doing so.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Still, the file does contain information that should raise some eyebrows. For example, 47 of the 279 properties have current estimated values in excess of $1 million. Many of these are 2-4 unit properties, but there are 18 condominiums and single family houses in the million dollar-plus category. One home has an estimated value of $8.65 million after being originally appraised at $12 million.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Perhaps the biggest surprise is the number of loans that have been modified. According to the Board's resolution, homeowners whose loans were sold into private label securitizations "are unable to access many of the foreclosure prevention programs available to other struggling homeowners". Yet the data tell a different story: &nbsp;129 of the 279 mortgages have had some kind of modification, such as principal reduction, interest rate reduction or additional time allowed for repayment. In many cases, multiple features of the mortgage were modified.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The resolution also notes that the vast majority of private label securitizations have "predatory" features. The features identified as predatory include negative amortization, interest only, balloon payments and adjustable rates. While I agree that negative amortization loans can be objectionable, I don't consider all these attributes to be necessarily predatory. Like many financial professionals, I have taken out ARMs on multiple occasions, and I never felt exploited. Indeed, since base interest rates are sharply lower than they were in 2007, it is likely that most ARM borrowers are paying little more than the original interest rates they incurred at origination. Of the 279 underwater San Francisco mortgages, 203 bear current interest rates of 4% or less - hardly predatory. Half of the universe consists of ARMs and another 49 are fixed rate.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Finally, it is worth noting that the vast majority of the underwater homes have multiple liens. In 244 of the 279 cases, the Combined LTV Ratio is different from the LTV Ratio, suggesting the presence of second and third mortgages. If one of the other liens is federally backed, the Authority may be challenged to liquidate the private mortgage while leaving the government mortgage intact.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Undoubtedly, some San Francisco homeowners were sold predatory mortgage products by unscrupulous financial institutions. In some cases, these individuals may still be underwater because their homes were aggressively appraised or they live in neighborhoods with less robust price appreciation.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">That said, we have yet to see a pool of mortgages that reliably falls into these categories. If the City cannot identify a set of mortgages that is fit for condemnation, the joint powers authority might benefit some undeserving homeowners - like the one with the $8.65 million house mentioned earlier. Further, if only a few dozen mortgages really do need to be liquidated, it is likely the City can find more cost effective means of doing so than through the use of eminent domain.</div>Marc Joffehttps://plus.google.com/102572265799554788902noreply@blogger.com4tag:blogger.com,1999:blog-3764912039741974037.post-23945653693303947852014-10-22T13:17:00.003-04:002014-10-22T14:29:25.770-04:00Ocwen Letter Spooks the Market<div style="text-align: justify;">Ocwen just can't seem to get a break.<br /><br />After a rough first 9 months to the year -- stock was down 53.5% YTD as of Monday's close -- the release of NY State Fin. Dept. Superintendent Benjamin Lawsky's letter to Ocwen's general counsel sent the stock tumbling again.&nbsp; </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><a href="http://expectedloss.blogspot.com/2014/02/mortgage-servicers-underserving.html" target="_blank">Our last coverage</a> was back in February, after Ocwen had agreed to a settlement fee, with the CFPB, of $2.2 <i>billion</i>, for its missteps from 2009-2012. &nbsp;We showed the potential for this litigation expense to grow, as there were even more complaints in 2013 against Ocwen than in 2012.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The stock is now down 24.8% from Monday's close: Lawsky's letter included some powerful language, some of which could have repercussions to Ocwen beyond the immediate scope of the letter. </div><br /><div blank="" class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/-AFWccq_HaYA/VEfdZrXLdrI/AAAAAAAAAW4/XPMneZKteAo/s1600/Lawsky%2Bletter.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-AFWccq_HaYA/VEfdZrXLdrI/AAAAAAAAAW4/XPMneZKteAo/s400/Lawsky%2Bletter.PNG" height="401" width="640" /></a></div><br /><div style="text-align: justify;">Lawsky's previous letter to Ocwen, dated April 2014, brought to the fore what Lawsky's office saw to be a "particularly troubling issue" - "the relationship between Ocwen and Altisource Portfolio’s subsidiary, Hubzu, which Ocwen uses as its principal online auction site for the sale of its borrowers’ homes facing foreclosure, as well as investor-owned properties following foreclosure."&nbsp;</div><div style="text-align: justify;"><blockquote class="tr_bq">Hubzu appears to be charging auction fees on Ocwen-serviced properties that are up to three times the fees charged to non-Ocwen customers. In other words, when Ocwen selects its affiliate Hubzu to host foreclosure or short sale auctions on behalf of mortgage investors and borrowers, the Hubzu auction fee is 4.5%; when Hubzu is competing for auction business on the open market, its fee is as low as 1.5%. These higher fees, of course, ultimately get passed on to the investors and struggling borrowers who are typically trying to mitigate their losses and are not involved in the selection of Hubzu as the host site.</blockquote></div><div style="text-align: justify;">In August, Moody's downgraded Ocwen's primary servicer and special servicer ratings - and left both assessments on watch for further downgrade. &nbsp;The shareholder class action complaints started to trickle in in August, and by September 2014 a handful of shareholder complaints had been filed. &nbsp;(See for example NORBERT TUSEO, Individually and on Behalf of All Others Similarly Situated v. OCWEN FINANCIAL CORPORATION, RONALD M. FARIS, JOHN V. BRITTI and WILLIAM C. ERBEY)</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The recent information about Ocwen's potentially backdating thousands of foreclosure documents is relevant not just insofar as it affects the nature of all current shareholder litigation, but insofar as Ocwen is being sued by mortgage borrowers, directly, and by mortgage market players and investors. &nbsp;Crucially, Ocwen's servicing performance can be critical to the performance of RMBS securities.<br /><br />For example, at least <u>five</u> third-party complaints have recently been filed by Nomura Credit &amp; Capital, Inc. against, among other co-defendants, Ocwen as the servicer of the RMBS trusts. The complaints argue that Ocwen's underperformance has harmed the plaintiff, or that the breaches ought alternatively to relieve Nomura of certain of its duties to the trust. &nbsp;The following excerpt comes from Nomura Credit &amp; Capital, Inc. v Wells Fargo Bank, N.A., and Ocwen Loan Servicing, LLC, filed 8/11/14.</div><div style="text-align: justify;"><br /><div blank="" class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-c16Vr9zxlQk/VEflKzDFaQI/AAAAAAAAAXI/JoF07mvXGZU/s1600/Nomura.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-c16Vr9zxlQk/VEflKzDFaQI/AAAAAAAAAXI/JoF07mvXGZU/s1600/Nomura.PNG" height="531" width="640" /></a></div><br />This public embarrassment can make it more difficult for Ocwen to defend itself in the existing and future litigation as it will inevitable have suffered a deterioration in reputation capital. &nbsp;Last but not least, it will likely further hinder any near-term hopes Ocwen may have had of buying additional mortgage servicing rights (MSRs), and expanding its business.</div>PF2noreply@blogger.com1tag:blogger.com,1999:blog-3764912039741974037.post-85940835927944449482014-09-29T18:18:00.001-04:002014-09-29T18:18:07.748-04:00Chicago’s Swap Contracts, Unfair Credit Ratings and a Way Out<div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In 2002, Warren Buffet called them financial weapons of mass destruction. In 2008, they triggered a severe national recession. And now, in 2014, they are jeopardizing the financial position of the City of Chicago. Like zombies who just won’t die, financial derivatives – put in place many years ago – now threaten to take a major bite out of the city’s reserves. Fortunately, new SEC rules may give Chicago the weapons it needs to ward off this financial Frankenstein.</span></div><div style="text-align: justify;"><b id="docs-internal-guid-c258e934-c375-f72c-dcd9-9d30021cc335" style="font-weight: normal;"><span style="font-family: inherit;"><br /></span></b></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Between 1999 and 2007, Chicago entered into a series of interest rate swap contracts with financial titans such as Goldman Sachs, Morgan Stanley and Bank of America. These swap contracts allowed the city to issue floating rate bonds while locking in a fixed interest rate - but they also locked the city into binding, long-term contracts, with the financial behemoths, that came with some unexpected risks.</span></div><div style="text-align: justify;"><b style="font-weight: normal;"><span style="font-family: inherit;"><br /></span></b></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The idea behind the swap contracts was appealing: the city treasury was protected from rising interest rates. At the time, no one knew that interest rates would fall to zero and stay there, obligating Chicago to pay hundreds of millions of swap payments to the major banks.</span><br /><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But there was a simpler alternative to issuing variable rate bonds and then offsetting the interest rate risk with swaps. The city could simply have issued more fixed rate debt. Traditional, fixed coupon bonds remain common in municipal finance and provide a straightforward way to lock in an interest rate.</span></div><div style="text-align: justify;"><b style="font-weight: normal;"><span style="font-family: inherit;"><br /></span></b></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: inherit;"><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The problem with simple solutions like fixed rate bonds is that they don’t generate a lot of income for financial intermediaries. In a 2011</span><a href="https://www.sec.gov/spotlight/municipalsecurities/statements072911/kalotay.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> testimony</span></a><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> at an SEC hearing, financial expert Dr. Andrew Kalotay observed that swap advisers, pricing agents and attorneys all charge substantial fees for their efforts, while banks typically charge a 2% markup on swap transactions. In Alabama,</span><a href="http://www.bloomberg.com/news/2011-09-16/jefferson-county-alabama-s-path-from-scandal-to-debt-settlement-timeline.html" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> $120 million in swap fees</span></a><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> contributed to that Jefferson County’s 2011 municipal bankruptcy filing. Kalotay went on to observe that corporations never finance themselves with a combination of floating rate bonds and interest rate swaps. They apparently realize that this combination is a good deal for Wall Street banks – and not for them.</span></span></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But excessive fees are not the only downside of these swaps contracts, as Chicago is now learning. Because swap contracts require cities to make payments to banks, they contain provisions that protect the banks in case a city becomes insolvent – as Detroit did.</span></div><div style="text-align: justify;"><b style="font-weight: normal;"><span style="font-family: inherit;"><br /></span></b></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: inherit;"><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In Chicago’s case, banks are protected by a clause that allows them to terminate the swap contract if the city is downgraded by Moody’s to a rating of Baa2. If the banks terminate their swap contracts under this provision, the city would have to immediately pay all the rest of the money it owes under the agreements – about $173 million according to</span><a href="http://www.bloomberg.com/news/2014-09-12/chicago-at-brink-of-swaps-fee-as-bond-ratings-fall-muni-credit.html" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> Bloomberg</span></a><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">.</span></span></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Recently, Moody’s downgraded the city to Baa1 - one step above the accelerated termination threshold - while maintaining a negative watch. Thus Chicago is in real jeopardy of suddenly being obliged to pay a lump sum of almost $200 million to the major banks.</span></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It is almost surreal when you think about it: &nbsp;banks and credit rating agencies widely blamed for a financial crisis that happened six years ago still hold the power to seriously compromise the city’s finances.</span></div><div style="text-align: justify;"><b style="font-weight: normal;"><span style="font-family: inherit;"><br /></span></b></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: inherit;"><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But reforms enacted in the wake of the financial meltdown may be used to protect Chicago. Dodd Frank contained a provision requiring rating agencies to consistently apply their rating symbols. This “universal rating symbol” requirement was recently included in new</span><a href="http://www.sec.gov/rules/final/2014/34-72936.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> SEC rule 17g-8</span></a><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">.</span></span></div><div style="text-align: justify;"><b style="font-weight: normal;"><span style="font-family: inherit;"><br /></span></b></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: inherit;"><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">There is ample evidence that rating agencies have discriminated against government bond issuers vis-a-vis other types of borrowers, including corporations and structured finance vehicles. &nbsp;For example, thousands of AAA-rated mortgage backed securities failed to make complete and timely debt service payments in recent years, while no city or county rated single-A or above has experienced such a payment failure. Evidence of this discrimination was surveyed in a March 2014</span><a href="http://www.sec.gov/comments/s7-18-11/s71811-78.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> comment letter</span></a><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> from the Consumer Federation of America to the SEC.</span></span></div><div style="text-align: justify;"><b style="font-weight: normal;"><span style="font-family: inherit;"><br /></span></b></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In 2008, the state of Connecticut sued all three credit rating agencies for this discriminatory practice. &nbsp;The case was eventually settled, with two of the three agencies agreeing to rescale their ratings in 2010. But this adjustment failed to fully address the ratings discrepancy and has been fully offset by subsequent downgrades attributed to pension underfunding.</span></div><div style="text-align: justify;"><b style="font-weight: normal;"><span style="font-family: inherit;"><br /></span></b></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Despite the many scare stories about public employee pensions, they have not played a major role in triggering municipal bankruptcies to date. In fact, since Detroit filed last July, no American city or county has initiated a Chapter 9 bankruptcy process. Moreover, most of the cities that previously filed – including Vallejo, Stockton, San Bernardino, Harrisburg and Detroit – did so because they faced some combination of declining revenue and deficient or negative general fund reserves. Pension obligations were, at most, a secondary issue.</span></div><div style="text-align: justify;"><b style="font-weight: normal;"><span style="font-family: inherit;"><br /></span></b></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="background-color: transparent; color: black; font-family: inherit; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Consequently, it is fair to argue that Chicago’s pension obligations do not justify its low ratings. Moody’s and other credit rating agencies should review Chicago’s ratings to ensure that they reflect the city’s real risk of defaulting over the next few years – which is miniscule. If Chicago’s ratings were properly rescaled, the city would no longer be on the verge of making $173 million in termination fees to the big banks.</span></div><div style="text-align: justify;"><span style="font-family: inherit;"><br /></span></div><div dir="ltr" style="line-height: 1.15; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="font-family: inherit;"><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Unlike today, the City of Chicago faced the real possibility of default in 1932. At that time, a large principal payment was coming due and the Depression-wracked city lacked the revenue needed to make it. &nbsp;Back then,</span><a href="http://archives.chicagotribune.com/1932/12/18/page/23/article/bankers-work-to-safeguard-citys-credit" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"> civic-minded bankers</span></a><span style="background-color: transparent; color: black; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> teamed up and worked overtime to find buyers for a new bond issue that allowed Chicago to roll over its debt and avoid bankruptcy. Eighty years ago, financial leaders believed they had a role to play in helping their cities survive financial turmoil; today it seems that the financial industry regards municipalities as just another lucrative source of fee income. &nbsp;</span></span></div>Marc Joffehttps://plus.google.com/102572265799554788902noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-37703145208346578012014-09-24T14:37:00.000-04:002014-09-24T14:40:07.117-04:00Securities Price Shopping<div style="text-align: justify;">We've all heard about how Michael Lewis' book (<i><a href="http://expectedloss.blogspot.com/2014/04/high-frequency-non-trading.html" target="_blank">Flash Boys</a></i>) has brought a flurry of attention to the (real) movements of stocks, but his work seems also to have spurred on a host of other initiatives that were already in the works. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Importantly, the "authorities" have been paying attention to the all-important consideration of pricing (of securities). &nbsp;In short, we think it's problematic that each party (fund, company, investor) gets to price its own assets. Two different banks can hold the same amount of the same investment, have the same auditor and the same regulator, and price the investment yards apart -- based on the application of different assumptions. We have a number of solutions to this problem, but have been arguing for <a href="http://expectedloss.blogspot.com/2011/05/pricing-transparency.html" target="_blank">pricing transparency</a> (where are these prices coming from, and upon what assumptions are they based) for many years.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The SEC had previously found troubling pricing practices ("violations of law or material weaknesses in controls") in the world of private equity. &nbsp;Now it has announced it found serious deficiencies in valuation processes used by hedge funds:</div><blockquote class="tr_bq"><div style="text-align: justify;">...regulators have discovered some funds engaging in what he called "flip-flopping," boosting valuations by changing the way they measure holdings several times a year. In some instances, the funds chose the measurement with the highest value or intentionally classified certain assets in a way that gave the fund manager more flexibility to inflate the price of the fund's holdings. (Source <a href="http://online.wsj.com/articles/sec-finds-deficiencies-at-hedge-funds-1411403677" target="_blank">WSJ</a>) </div></blockquote><div style="text-align: justify;">FINRA recently fined Citi upon finding that "one of Citigroup's trading desks employed a manual pricing methodology for non-convertible preferred securities that did not appropriately incorporate the National Best Bid and Offer (NBBO) for those securities." According to FINRA, "Citigroup priced more than 14,800 customer transactions inferior to the NBBO." FINRA also notes, as if it comes straight out of Flash Boys which focuses on exchange execution and the NBBO, that...</div><blockquote class="tr_bq"><div style="text-align: justify;">"Citigroup priced more than 7,200 customer transactions inferior to the NBBO because the firm's proprietary BondsDirect order execution system (BondsDirect) used a faulty pricing logic that only incorporated the primary listing exchange's quotation for each non-convertible preferred security."</div></blockquote>For a list of pricing "issues" and disagreements, <a href="http://expectedloss.blogspot.com/2011/04/contested-pricings-list.html" target="_blank">click here</a>. For our other coverage on high frequency trading (HFTs), <a href="http://expectedloss.blogspot.com/search/label/High%20Frequency%20Trading" target="_blank">click here</a>. <br /><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Meanwhile, we've been tracking dark pool trading flow after the recent investigations. &nbsp;In an <a href="http://expectedloss.blogspot.com/search/label/High%20Frequency%20Trading" target="_blank">earlier blog</a> we tabulated recent trading levels, showing the reported, dramatic, drop in trading at Barclays' dark pool. &nbsp;Since then, the flow within Barclays' has stabilized and gone up just a touch in August, while overall ATS trading levels have stabilized somewhat. &nbsp;This is despite any seasonality component, with general trading levels on exchanges <u>down</u> roughly 9.5% since June (i.e., comparing August to June).</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a blank="" href="http://4.bp.blogspot.com/--OV9hmW00x8/VCMOUyST0LI/AAAAAAAAAUA/ALFmjwGL9mA/s1600/ATS%2BShare%2BVolume%2B082514.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;target="blank""><img border="0" src="http://4.bp.blogspot.com/--OV9hmW00x8/VCMOUyST0LI/AAAAAAAAAUA/ALFmjwGL9mA/s1600/ATS%2BShare%2BVolume%2B082514.png" height="640" width="499" /></a></div><div style="text-align: justify;"><br /></div>PF2noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-52676036579926425022014-07-23T13:01:00.000-04:002014-09-24T14:40:39.196-04:00The Trading's Trailing Off<div style="text-align: justify;">There's been some generally miserable news floating about about big bank trading levels.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In a Forbes <a href="http://www.forbes.com/sites/greatspeculations/2014/06/11/heres-how-trading-revenues-at-the-countrys-largest-banks-stack-up/" target="_blank">article</a>, the team at Trefis put lower trading revenues down to "an overall reduction in trading activity over the period (a temporary factor) and a reduction in total market size as a direct result of stricter regulations (a permanent factor)."</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Meanwhile, a number of media outlets were quick to cover the fact that trading levels within <a href="http://www.bloomberg.com/news/2014-07-21/barclays-dark-pool-volume-fell-66-week-after-lawsuit.html" target="_blank">Barclays' dark pool has declined an incredible 66%</a> during the week ending June 30th, versus the prior week.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We investigated this a little further and found that the week ending June 30th was not a good one for any of the alternative trading systems (ATSs). &nbsp;It's not necessarily (or only) that Barclays' former clients may have been aggrieved at certain claims or findings made public in the NY Attorney General's complaint filing against Barclays, as could be inferred from a strict reading of some of the coverage -- but that trading levels at ATSs declined generally, with overall trading levels off 25% across the board, and by a median of roughly 20% across all ATSs. &nbsp;The numbers are still in the same region even if we control for smaller ATSs, by only looking at the 15 largest ATSs as measured by share-trading volume for the week ending June 9.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Banking pundits will be hoping this is only midsummer madness, or maybe due to interim distractions from the Football World Cup. &nbsp;The week ending June 30th coincided with the final week of group games. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Anyhow, here are the numbers from our extraction of aggregated trade data reported by ATSs to FINRA pursuant to Rule 4552. <br /><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="http://2.bp.blogspot.com/-g_oPzU9sRno/U8_pQk8KCrI/AAAAAAAAAOE/G2xENxk4YmE/s1600/ATS+Share+Volume.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em; target="blank""><img border="0" src="http://2.bp.blogspot.com/-g_oPzU9sRno/U8_pQk8KCrI/AAAAAAAAAOE/G2xENxk4YmE/s1600/ATS+Share+Volume.png" height="640" width="450" /></a></div><div style="text-align: justify;"><br /></div>PF2noreply@blogger.com1tag:blogger.com,1999:blog-3764912039741974037.post-40488450957321910842014-06-19T13:19:00.003-04:002014-06-19T13:19:53.989-04:00We'll Promise You Best Execution -- For Us (That Is)<div style="text-align: justify;">The high-frequency investigations just heated up a notch this week, with some choice testimony coming from the&nbsp;<span id="goog_1898443904"></span><a href="http://archive.org/details/CSPAN2_20140618_020000_Key_Capitol_Hill_Hearings#start/1500/end/1560" target="_blank">grillings on Capitol Hil<span id="goog_1898443905"></span>l</a>.</div><div style="text-align: justify;"><a href="http://4.bp.blogspot.com/-ui0TsHgm-UY/U6MXa5OhgKI/AAAAAAAAAN0/_u3-I0dEtkw/s1600/TD+Order+Routing+Testimony+(Cap+Hill).PNG" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/-ui0TsHgm-UY/U6MXa5OhgKI/AAAAAAAAAN0/_u3-I0dEtkw/s1600/TD+Order+Routing+Testimony+(Cap+Hill).PNG" height="640" width="139" /></a></div><div style="text-align: justify;"><br />We previously had <a href="http://www.valuewalk.com/2014/05/goldman-sachs-included-hft-investigation/" target="_blank">investigations</a> (SEC, FBI, DOJ, NY AG) into the activities within dark pools, and they were mostly concerned with whether information about some parties was being disclosed to other parties, when it might have been expected to be hidden. &nbsp;There were also more general concern about whether the game had changed in such a way as to make it easy for the high frequency trading firms (the HFTs) to game the "ordinary" investor.&nbsp;</div><br /><div style="text-align: justify;">The recent hearings, held by the Permanent Subcommittee on Investigations, have now honed in on the all-important question of whether online or discount brokers are appropriately routing their customers' order flow in the best interests of the customer. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">As highlighted in a <a href="http://online.wsj.com/articles/td-ameritrade-executive-says-orders-go-to-venues-that-pay-highest-fees-1403043559#printMode" target="_blank"><i>WSJ</i> article</a>, there seems to be an indication that, at least for TD Ameritrade, the flow went to the exchange that was most likely to produce the highest refund (or revenue gain) to TD. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We haven't as yet been able to track down the transcript of the hearing (aside from the written statements, that is) but the snippet on the right seems to corroborate the <i>WSJ'</i>s coverage:</div><div style="text-align: justify;"><br /></div><blockquote class="tr_bq" style="text-align: justify;">"Mr. Levin asked [TD Ameritrade's] Mr. Quirk whether the firm's routing decisions "virtually always led you to route orders to the markets that paid you the most."</blockquote><blockquote class="tr_bq" style="text-align: justify;">"Virtually, yeah," Mr. Quirk replied.</blockquote><div style="text-align: justify;"><br /></div><div style="text-align: justify;">TD Ameritrade had already been feeling the heat from some clients who recently learned how much TD made from selling order flow to Citadel and Knight Capital. This testimony, we imagine, won't help any!</div>PF2noreply@blogger.com0tag:blogger.com,1999:blog-3764912039741974037.post-67144471441755370762014-04-09T17:25:00.002-04:002014-04-10T09:05:41.847-04:00Are "Dark Pool" Probes Pending?<div style="text-align: justify;">Banks' so-called "dark pool" trading venues are all the rage these days. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The media jumped when dark pools were cited in federal authorities' and investor class action complaints against SAC Capital and its executives. The focus was on how the anonymity associated with dark pools, and the levels of secrecy they provide, allowed SAC and/or its members to avoid detection and potential losses on its sale of stock. (See also <i><a href="http://investigations.nbcnews.com/_news/2013/01/23/16633004-gazing-into-dark-pools-the-tool-that-enables-anonymous-insider-trading" target="_blank">Gazing into 'dark pools,' the tool that enables anonymous insider trading</a></i>)</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">One quote from a <a href="http://msnbcmedia.msn.com/i/msnbc/sections/news/SAC_Capital_Complaint.pdf" target="_blank">complaint</a> reads:</div><blockquote class="tr_bq"><div style="text-align: justify;">“We executed a sale of over 10.5 million ELN for [various portfolios at CR Intrinsic and SAC LP] at an avg price of 34.21. This was executed quietly and efficiently over a 4 day period through algos and darkpools and booked into two firm accounts that have very limited viewing access.”</div></blockquote><div style="text-align: justify;">Next Goldies brought its dark pool, Sigma X, to the fore. &nbsp;Having discovered pricing errors within the opaque pool, Goldman <a href="http://www.bloomberg.com/news/2014-03-13/goldman-sachs-said-to-send-refunds-after-dark-pool-error.html" target="_blank">reportedly</a> decided to send refund checks to customers to compensate them for the mistakes.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Michael Lewis didn't make matters any easier for Goldman or dark pools, giving them a hard time in his new book, <i>Flash Boys</i>. &nbsp;Among other things, he casts doubt on whether investors got "best execution" through the dark pools:</div><blockquote class="tr_bq"><div style="text-align: justify;">“A broker was expected to find the best possible price in the market for his customer. The Goldman Sachs dark pool—to take one example—was less than 2 percent of the entire market. So why did nearly 50 percent of the customer orders routed into Goldman’s dark pool end up being executed inside that pool—rather than out in the wider market.”</div></blockquote><div style="text-align: justify;">That quote, alone, might not be altogether convincing: it's not clear whether he's looking at scenarios in which Goldman's clients have requested execution through the Sigma X, or whether Goldman's clients, requesting best execution, were oddly quite regularly executed through Sigma X, despite the potential for sub-optimal execution through that platform. &nbsp;It's probably fair to say that those requesting execution through the dark pool would agree that they were foregoing "best execution" in the market - which is something one typically foregoes even with "hidden" orders submitted to an (open) exchange.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">But now Goldies is back in the <a href="http://online.wsj.com/news/articles/SB10001424052702304819004579490030481110264" target="_blank">spotlight</a>. &nbsp;According to today's&nbsp;<i>WSJ</i>, they're considering shutting down their dark pool. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">But why?</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">According to the Journal article, Goldman executives are weighing the benefits of the revenues it produces, against the burdens dealing with trading glitches and negative press. &nbsp;Some burdens those must be, given Sigma X is purportedly one of the largest bank dark pools, and is likely producing significant flow.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b>Perhaps there's another theory...</b></div><div style="text-align: justify;"><br />Consider these stories:<br /><br /></div><div style="text-align: justify;">In January 2014 Barclays decided to <a href="http://www.leaprate.com/forex-industry-news/entry/barclays-to-close-barclays-margin-fx-due-to-difficult-emir-regulations.html" target="_blank">shut down</a> its retail / margin Foreign Exchange business, Barclays Margin FX; in February, NY regulator Lawsky opened a <a href="http://www.bloomberg.com/news/2014-02-05/lawsky-said-to-open-currency-probe-of-more-than-one-dozen-banks.html" target="_blank">currency markets probe</a>.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In January 2014 Deutsche Bank AG (DBK) <a href="http://www.bloomberg.com/news/2014-01-17/deutsche-bank-withdraws-from-gold-fixing-in-commodities-cutback.html" target="_blank">announced</a> that it will withdraw from participating in setting gold and silver benchmarks in London; &nbsp;in March, the CFTC <a href="http://online.wsj.com/news/articles/SB10001424127887324077704578358381575462340" target="_blank">announced</a> that it is looking at issues including whether the setting of prices for gold—and the smaller silver market—is transparent.&nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In July 2013, the CFTC put&nbsp;metals warehouses on <a href="http://reut.rs/1hhhK3H" target="_blank">notice</a> of a possible probe. By November 2013 Goldman was <a href="http://www.reuters.com/article/2013/11/18/us-goldman-metro-sale-idUSBRE9AH0U120131118" target="_blank">resuming talks</a> to sell its&nbsp;metals warehouses and seeking a buyer for its <a href="http://www.bloomberg.com/news/2013-11-22/goldman-sachs-said-to-seek-buyer-for-uranium-unit.html" target="_blank">uranium trading unit</a>;&nbsp;and by March 2014 we had various <a href="http://www.bloomberg.com/apps/news?pid=newsarchive&amp;sid=aSDKaUvU_BaA" target="_blank">notices</a> of JP Morgan's intent to sell its physical commodities divisions.<br /><br /><b>Probe and Sale</b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We could go on and on, but ultimately these are all anecdotal and we aren't wanting or looking to prove statistical significance at this stage. &nbsp;We're also not too concerned about what comes first: the probe or the sale. &nbsp;There's certainly no one-to-one mapping. &nbsp;Not every regulatory probe is followed by a sale, or vice-versa. &nbsp;We're only wondering if there's a pattern. And if there's a pattern, could there be an explanation as to why there's a pattern?<br /><br />Here's one theory. &nbsp;(We welcome yours.) &nbsp;Might it be that, pending a likely or imminent (<i>and embarrassing or&nbsp;expensive)</i> enforcement action, banks may take preemptive action in selling "problematic" divisions ... to enable the negotiation of a more lenient settlement as they're (now) less likely to be repeat offenders of whatever activity was the subject of the probe?</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In other words, is a dark pool probe pending?</div>PF2noreply@blogger.com1tag:blogger.com,1999:blog-3764912039741974037.post-78461996599594988752014-04-04T11:16:00.001-04:002014-04-04T16:09:20.297-04:00High Frequency (Non) Trading<div style="text-align: justify;">This week's release of Michael Lewis' new book, <i>Flash Boys</i>, has renewed focus on a little understood area of the market, an area that has garnered the recent attentions of market regulators, New York's Attorney General, and more recently the FBI -- but never as much attention as it garnered from Michael Lewis' interview on<i> 60 Minutes</i> on Sunday, with his book pending release the following day.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Without going into too many specifics, one of the central themes that Lewis discusses is the potential for high frequency traders (or HFTs) to take advantage of certain market information -- like bids and offers -- that are unknown to many other market players.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Defenders of HFTs have come out aggressively, with claims that HFTs increase market activity and liquidity, and have lowered trading costs. &nbsp;The <i>WSJ</i> published an extensive <a href="http://online.wsj.com/news/articles/SB10001424052702303978304579475102237652362" target="_blank">opinion editorial</a>&nbsp;by hedge fund guru Cliff Asness and his colleague Michael Mendelson of AQR, which energetically claims that much of what HFTs do is "make markets" and that they do it best because "their computers are much cheaper than expensive Wall Street traders, and competition forces them to pass most of the savings on to us investors." </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Of course this sounds altogether too convincing. &nbsp;Unfortunately, Asness and Mendelson provide little or no evidence (although their business as long term traders relies heavily on evidence, and they claim in the article to spend considerable energies looking into their trading costs) and they admit that they actually don't have too much conviction in the premise of their exposition:</div><blockquote class="tr_bq" style="text-align: justify;">"We <i>think</i> it helps us. <i>It seems to</i> have reduced our costs and <i>may</i> enable us to manage more investment dollars. <i>We can't be 100% sure</i>. <i>Maybe something other than HFT is responsible for the reduction in costs</i> we've seen since HFT has risen to prominence, like maybe even our own efforts to improve."&nbsp;(emphasis ours)</blockquote><div style="text-align: justify;">But this aside, no doubt all forms of HFTs bring liquidity. &nbsp;They're a good thing. &nbsp;Let's focus our attention elsewhere. &nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Or not?</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Might there be another type of HFT, that doesn't always bring liquidity for the greater good of the market ... &nbsp;perhaps a type that uses obscure mechanisms to change the look and feel of the market -- to make people think there is a bid, think there is an offer, without there being one? &nbsp;</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">This is what <i>Flash Boys</i>, and the interest it has invigorated in HFTs, really concerns itself with -- understanding market maneuvers like spoofing or pinging: the submission of phantom orders, immediately cancellable, that have the potential to create a false impression of market levels.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Are we creating a whole lot of (potentially fictitious) orders, but not a whole lot of activity? &nbsp;Are there high-frequency non-traders? &nbsp;Are we mis-marking our portfolios as a result? We continue to investigate. &nbsp;But we couldn't help but bring you back to a 2013 chart from <i><a href="http://www.motherjones.com/politics/2013/02/high-frequency-trading-danger-risk-wall-street?page=1" target="_blank">Mother Jones</a></i>, which highlights the growing contrast between actual trades (in orange) and quotes/orders (in red).</div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="http://2.bp.blogspot.com/-pi5KDTitFUc/Uz7KmSTF41I/AAAAAAAAANk/UmCDq9XndZc/s1600/HFT.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-pi5KDTitFUc/Uz7KmSTF41I/AAAAAAAAANk/UmCDq9XndZc/s1600/HFT.PNG" height="484" width="640" /></a></div><br />PF2noreply@blogger.com0